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A RAPID IMPACT ASSESSMENT
OF THE GLOBAL ECONOMIC CRISIS ON LIBERIA
Prepared for the Republic of Liberia
with technical assistance from Professor James Heintz and
the International Labour Organization
November 2009
Copyright © International Labour Organization 2009
First published 2009
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A rapid impact assessment of the Global Economic Crisis on Liberia prepared for the Republic
of Liberia with technical assistance from Professor James Heintz and the International Labour
Organization
ISBN 978-92-2-122945-2; 978-92-122946-9 (web pdf)
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Preface
The primary goal of the International Labour Organisation (ILO) is to
contribute, with member States, to achieve full and productive employment and
decent work for all, including for women and young people, a goal embedded in
the ILO 2008 Declaration on Social Justice for a Fair Globalization, and more
recently re-iterated in the Recovery from the Crisis: A Global Jobs Pact
negotiated during the International Labour Conference in June 2009. The
commitment to this goal has been widely adopted by the international
community.
This goal is more challenging today than ever given the impact on jobs and
working conditions of the global economic and financial crisis. The magnitude
and nature of the impact of the crisis, and the transmission channels through
which it affects workers and households varies widely between countries. ILO
is committed to supporting countries such as Liberia and its social partners to
assess the crisis impact, and to determine options for policy responses. Indeed
this is a central objective of the Global Jobs Pact, and this report is a reflection
of this commitment.
Liberia is the first African country to undertake a full assessment of the impact
of the crisis on employment with ILO support. The recently published Guide1
provided the basic methodology for determining the approach, and we wish to
extend our appreciation to the many national stakeholders and development
partners who took part in the process. Liberia is facing an important cross-road
in its development strategy given the impact of the crisis on both employment
and incomes, and on public and private revenues. Strategic choices will need to
be made in light of the increasingly constrained resource envelop for
development. Alignment of the activities of the many development partners
with these choices in order to ensure maximum impact under these difficult
circumstances should be actively encouraged. Inclusive job-rich growth needs
to be squarely and firmly in the focus, and strong support by the international
community towards reaching HIPC completion point is a necessary prerequisite
for getting on a sound development path. Liberia’s support from the
international community and its credibility remains unabated, and it is ILO’s
intention for this report to illustrate our continuing commitment to being an
active development partner.
Jose Manuel Salazar-Xirinachs
Executive Director
Employment Sector
ILO Geneva
1
“Country Level Rapid Impact Assessment of the Crisis on Employment : A Guide (test
version)”, 2009, Employment Sector, ILO
Liberia Crisis Assessment, 2009
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Liberia Crisis Assessment, 2009
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Acknowledgements
This report represents the culmination of many peoples’ efforts, and is the first
rapid impact assessment of the crisis in Africa led by the International Labour
Organisation. It has drawn heavily from the methodology provided in the test
version of The Guide to Rapid Impact Assessment of the Crisis on Employment
(2009). Professor James Heintz provided the insightful overall analysis
contained here.
The process was coordinated at ILO headquarters by Alana Albee, and in
Monrovia by Peter Hall with facilitation by Sina Chuma-Mkandawire and her
staff in ILO Abuja. Technical fieldwork was tightly sequenced and included
vital information gathering, analysis and reviews done by Erik von Uexkull
(ILO, trade), Yves Perardel (ILO, TRENDs) and Dain Bolwell (ILO, Dialogue).
Jon Beaulieu (ILO, TRENDs) with Liberian researchers Samuel Thompson and
Annie Demen led an innovative enquiry process with workers’ and employers’.
Special thanks are given to the Government of Liberia, and specifically the
Ministry of Labour and the full National Tripartite Council. Special recognition
is given to the Liberia Chamber of Commerce and the Heads of the Liberian
Labour Congress whose leadership, and networks with the many workers’ and
employers’ made the process a success despite time constraints. In addition
special mention is given to the Minister of Finance and his team, the Ministry of
Commerce, Trade and Industry, and the Ministry of Planning and Economic
Affairs. Contributions by a number of development partners in Monrovia were
also very helpful, including from the World Bank, the International Monetary
Fund, and UNDP
.
Liberia Crisis Assessment, 2009
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Liberia Crisis Assessment, 2009
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Table of contents
Preface
Acknowledgements
Executive Summary and Recommendations ………………………………..
8
1. Introduction ……………………………………………………………..
18
2. Methodology …………………………………………………………….
20
3. A brief overview of Liberia’s economy before the crisis ………………..
24
4. The employment and labour market situation in Liberia before the crisis
30
5. The Liberia Poverty Reduction Strategy and National Employment Policy
36
6. Channels through which the global crisis affects the Liberian economy …
40
7. Overview of the Employment Impacts of the Crisis …………………….
50
8. Sectoral analysis ………………………………………………………….
54
9. The impact of the crisis on households …………………………………..
72
10. Economic Policy Space and Strategies …………………………………….
74
11. Labour market institutions, employment programmes, and social dialogue
82
12. Policy responses and strategies for addressing the crisis …………………
86
13. Concluding remarks ………………………………………………………
92
APPENDIX
Part A. List of consultations, meetings, and interviews. ………………………
94
Part B. Guiding interview questions for enterprises/employers. ……………….
96
Part C. Priority themes of the workers inquiry ……………………………
102
Part D. Policy suggestions and priorities identified in the interviews ..…
103
Liberia Crisis Assessment, 2009
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Executive Summary and
Recommendations
The global economic crisis has occurred at a critical junction for Liberia.
The country has started down the path of development after years of civil war,
conflict and instability left the country’s 3.5 million people extremely
vulnerable and the nation’s economy devastated. The downturn adds to the
formidable challenge of reconstruction, peace-building, poverty reduction, and
expanding the opportunities for decent work. Given the potentially far-reaching
consequences of the crisis on Liberia’s national development strategy (LPRS) at
this time, there is an immediate need to assess the impact of the crisis and
formulate effective responses.
The ILO, in collaboration with other development partners, was
requested by the Government of Liberia to undertake a rapid assessment of the
global economic crisis and its employment impact. This report documents the
effects on employers and workers and considers the implications for the
realisation of the objectives of the Liberia Poverty Reduction Strategy (LPRS).
The assessment pulls together the findings from worker and employer
interviews; consultations with policymakers, social partners, development
partners, and other stakeholders; and analysis of existing quantitative data.
Information was collected over a two month period, primarily during June and
July, 2009.
The assessment found that the global economic crisis already has had
serious implications for the realisation of the goals of the LPRS. The crisis has
adversely impacted public revenues, which constrain the ability of government
to deliver on components of the LPRS. The growth path has come under
pressure due to the collapse of demand in global markets for Liberian products,
creating sizeable challenges for restoring production and trade of natural
resource products. This is affecting the on-going negotiations of concession
agreements. The crisis has negatively affected employment, with important
implications for poverty reduction and social stability. In light of the crisis,
there is a need to revisit and more strictly prioritise areas of delivery within the
LPRS in order to make the most of limited available resources.
The policy space for launching a comprehensive response to the crisis is
severely circumscribed in Liberia. Liberia runs a cash-based budget in which
total expenditures must not exceed the sum of current revenues and any
accumulated cash reserves. Therefore, there is no scope for a traditional
expansionary fiscal policy. Instead, any shortfalls in expected revenue collection
Liberia Crisis Assessment, 2009
8
due to the crisis must be met with either cuts to spending or delays in
disbursements. The high degree of dollarisation, the lack of a domestic capital
market, and excess liquidity holdings among commercial banks limit the
effectiveness of monetary policy. The critical importance of public investment
in Liberia’s reconstruction is widely recognised, both basic economic
infrastructure and critical areas of social infrastructure, such as the construction
of schools and clinics. With the global crisis, delivery of essential infrastructure
will continue to depend on donor resources and official development assistance.
The global crisis has impacted the economy through four channels: the
negative effect on government revenues, the decline in exports and commodity
prices, a less favourable climate for foreign investment and negotiation of
concession agreements, and a reduction in the inflow of remittances. The longrun effect of the crisis remains uncertain, and depends on the length and depth
of the global downturn. At this time, donor commitments to Liberia appear to
have been largely unaffected by the global crisis. Nevertheless, maintaining the
country’s credibility among the donor community in order to continue to
mobilise external financing for LPRS delivery will depend on continued
progress towards the HIPC completion point over the next year, requiring
formal adoption of the Public Financial Management (PFM) reforms.
Impact of the crisis on employment, households, and strategic sectors
The crisis is already having a substantial effect on employment in
Liberia. The findings of the assessment suggest that the impact will be felt most
strongly by the hundreds of thousands of individuals self-employed in
smallholder agricultural production and those working in informal
employment. In the rubber sector alone, the crisis will directly impact the
livelihoods of up to 60,000 smallholder producers and thousands of contract
workers. Among large enterprises, analysis of government records shows that
the decline in employment has been particularly noticeable in the rubber and
iron ore sectors. The consequences for the well-being of the population of this
loss of employment income will be more far-reaching, since many dependents
rely on the earnings from each individual in the labour force.
On average, businesses interviewed have reported about a 20 percent
decrease in turnover from the previous year. For small scale enterprises and
informal workers, many of which operate in the service sector catering to
domestic markets, the fall in demand will decrease earnings and productivity.
This decline in the domestic market will directly affect many own-account and
contributing family workers in terms of their contributions to household
incomes and family well-being.
Such pressures can further frustrate the already challenging goal to
improve educational attainment since they may exacerbate low school
attendance, as children and youths are required to assist in the household or
support income generating activities. At the macro level, reduced government
Liberia Crisis Assessment, 2009
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revenues may have a knock-on effect in terms of resources available to the
educational system.
The negative employment effects should be seen within the context of
Liberia’s vulnerable labour force. Half of the country’s population is under 20
years of age. If access to decent work opportunities does not improve for young
people now and in the future, the potential for social and economic instability
will increase. In addition, most employed Liberians work in vulnerable forms of
employment with high risks of poverty and no social protections. Informal nonagricultural employment and employment in agriculture account for 84 percent
of total employment. Individuals in these types of employment have low
earnings and face high economic risks. The years of conflicts have had a
dramatic impact on the country’s human resources – through lost opportunities
for education and training. Two-thirds of employed Liberians, and over 80
percent of employed women, have at most a primary education. The global
crisis heightens these vulnerabilities and inequities, as the formal labour market
has not been able to generate sufficient employment to absorb a growing
workforce.
The assessment investigated the impact of the crisis on six strategic
sectors: rubber, rice, palm oil, iron ore, timber and gold. Rubber is currently
Liberia’s most important export commodity, accounting for 80 percent of total
exports in 2008. A significant decline in the price of rubber has negatively
affected workers, employers, and smallholder producers. The crisis comes at a
crucial time because the government is re-negotiating concession agreements
with two major plantations. In addition, significant investments in replanting
have to be made now, including by smallholders, to secure the sector’s future.
Programmes to support investments are critical for preventing the downturn
from undermining the economic viability of the sector in the future. Provisions
in concession agreements which provide support to out-growers for replanting
should be protected. The Ministry of Agriculture has worked together with
donors to help rubber smallholders diversify into cocoa. With financial and
technical support, such programmes could be expanded in response to the crisis.
Rice is Liberia’s most important food crop and has tremendous
importance for food security and political stability. Revitalizing rice production
among smallholders holds enormous potential for generating employment and
would reduce pressures on the national budget from government support of rice
imports. A rough calculation based on prevailing productivity levels suggests
that if Liberia were to reach self-sufficiency in rice, this would generate the
equivalent of up to 470,000 additional jobs, although this added employment
would be dominated by own-account and contributing family workers.
Improving the quality of employment in the sector over time will require
sustained productivity improvements. The global crisis appears to have put an
end to the rapid increase in rice prices that was reducing living standards, but
could dampen domestic production in a sector that plays a central role in
securing jobs, food security and household welfare. The impact of the crisis on
economic vulnerability underscores the need to revitalise rice production among
Liberia Crisis Assessment, 2009
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smallholders, an initiative which would require addressing land tenure issues;
lack of transportation, storage, and milling infrastructure; access to inputs; and
limited technical know-how.
Palm oil and iron ore are two sectors which have large export potential,
even though the current level of exports is small. Palm oil has the potential to
create a significant number of jobs through new concession agreements and
Liberia is in a strong competitive position to meet domestic and regional
demand in West Africa. Production of iron ore has ceased in Liberia, but is
expected to recommence in the near future under two new concession
agreements. Iron mining is capital-intensive and generates fewer jobs than other
sectors, but activities associated with iron mining have already created
employment. A major concern is that the global crisis will cause delays in
foreign investment, production, and anticipated job creation associated with new
concession agreements in iron ore and palm oil. The crisis has already had
negative impacts on the iron sector, leading to work force reductions and the
suspension of road and railway rehabilitation investments.
Timber exports have not yet recovered and the employment potential of
the sector has not been realised. The prospects for timber remain uncertain in
the near future. New concessions have been awarded, but many of these were
not viable. Although the problems of the timber sector could have been
aggravated by the current crisis, the main problem is a failure to attract foreign
investors that could revitalise production in the sector.
Gold mining in Liberia remains on a small scale artisanal basis and it is
unlikely that the sector will experience significant development in the near
future. Despite favourable world market conditions, the crisis has affected the
prospects for large-scale commercial gold mining through the tightening of
international credit availability for exploration and mineral extraction.
Policy responses and strategic areas of intervention
The impact of the crisis on Liberia’s development objectives, as outlined
in the LPRS, is significant. Given the limited policy space at Liberia’s disposal
and the on-going reliance on donor support, there is a critical need to prioritise
movement towards the HIPC completion point. A prerequisite for the
completion point is the passage of the public finance management (PFM)
reforms. A well-functioning PFM system is also necessary for coordinated
donor support in the future, preferably in the form of increased budget support,
which would improve the impact, the scale, and the pace of development.
Reaching the completion point would relax Liberia’s fiscal resource constraint
by providing some additional relief in terms of debt servicing payments and
opening up the possibility for concessional borrowing.
Liberia Crisis Assessment, 2009
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In addressing the negative consequences of the global crisis,
infrastructure investment through expanded public works programmes
represents a strategy with both short-run and long-run benefits. The direct loss
of jobs could be addressed through emergency employment policies which
would provide employment opportunities to those adversely affected by the
crisis, particularly if labour-intensive infrastructure projects are adopted. Such
programmes would leave behind public assets which provide benefits
communities and the private sector. With sufficient donor and technical support,
programmes could be scaled up to create jobs for workers displace by the global
crisis.
However, short-term emergency employment programmes do not
constitute a comprehensive response to the lack of decent work opportunities in
Liberia. A national policy framework for creating employment and supporting
livelihoods is essential if Liberia is to lay the foundations for equitable and
inclusive growth. Ensuring that the National Employment Policy is a
comprehensive and visionary document with broad ownership is necessary at
this time. The priorities identified in the Employment Policy should also be
reflected in the LPRS. Strong institutions are needed to implement a national
employment strategy. The creation of the National Bureau of Employment
represents an important step in this direction. With appropriate financial,
technical, and political support, the National Bureau of Employment can
coordinate efforts to improve employment opportunities across Ministries and to
implement active labour market policies to facilitate equitable access to
employment.
Informal employment is one of the largest categories of employment in
Liberia. An integrated strategy is needed to improve the earnings, productivity
and working conditions of those employed in informal activities. This would
involve the ‘formalisation’ of informal employment, in the sense that strategies
to support these workers and their livelihood strategies would be developed,
and, in turn, those in informal employment would be expected to contribute to
government tax revenues at an equitable rate. Such strategies require an
integrated approach involving training, finance, technical support to enterprises,
targeted public investments, improved labour force information, and regulatory
changes to support the growth of SMEs. Coordination across various Ministries
(e.g. Commerce, Labour, Finance, Agriculture, Gender, Youth, and Planning)
would be needed to create an integrated for improving the quality of informal
employment.
The period covered by the concession agreements exceeds the expected
duration of the global crisis. Any deterioration in Liberia’s bargaining position
is likely to be temporary. Therefore, it is important to ensure that short-term
responses to the crisis do not have long-run negative consequences for Liberia’s
development trajectory. The planned National Investment Law will be useful to
give the government a stronger stance against pressure for ad hoc benefits to
companies. If unavoidable, explicitly linking temporary benefits (e.g. reduced
royalty payments) to global commodity prices represents one strategy for
Liberia Crisis Assessment, 2009
12
making sure that the any crisis-related benefits are temporary. Leniency can be
granted to concession holders while global markets are depressed, but then
removed once they have recovered. During boom periods, government’s share
of the natural resource rents would rise.
The potential for increased industrial disputes and conflicts linked, at
least in part, to the crisis is significant. Such conflicts can be costly in economic,
social, and human terms, and processes of social dialogue can reduce these
costs. In anticipation of these growing tensions, government, along with the
social partners, should be prepared to set up, as well as to strengthen existing,
social dialogue bodies where they are needed and to make effective mediation
services available.
Given domestic resource constraints, it is important to identify resources
which are under-utilised. Liberia’s relatively healthy financial sector represents
one potential source of such resources. The domestic banking sector has the
capacity to extend additional credit which could support productive
investments. Already, several domestic banks have created microfinance
programmes. These could be expanded within a coherent framework for
financial sector reform, with government support. Informal and small-scale
enterprises face multiple constraints, and providing credit without addressing
these other needs will have a limited impact. There is a need for a coordinated
approach which pulls together small loans, capacity building, and market
facilitation. Not all enterprises will be prepared to take advantage of micro- and
small-scale loan programmes. However, for those who are ready, such
initiatives could help address the negative impacts of the crisis on small-scale
enterprises, the vulnerable self-employed, and smallholder agricultural
producers.
Although Liberia may appear to have little policy space to respond to the
challenges raised by the global crisis, there are a number of strategies which
could be pursued, and these should be considered for prioritisation within the
LPRS framework. They should build on recent initiatives and points of strength,
and should focus policy efforts on improving employment opportunities as the
single best strategy for reducing poverty, raising living standards, and
maintaining social stability. The Poverty Reduction Strategy and the National
Employment Policy provide two complementary blueprints for moving forward.
The challenge of inclusive growth and equitable development is very much a
challenge of creating decent work for all. It will take years to get there, but
developing an appropriate employment-centred response to the current crisis
represents a concrete step towards this ultimate goal.
Priority Strategic Actions and Recommendations
In the course of the rapid assessment of the global crisis, a number of
concrete responses emerged, many building on programmes, processes, and
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13
policies already underway. These represent priority strategic actions to be taken
forward by stakeholders, but requiring leadership by the Government of Liberia2
These include:
•
Public Revenue: Given the uncertainty surrounding government
revenues, the Ministry of Finance has adopted a risk management
strategy for fiscal year 2009/10 in which cash disbursements to line
ministries are subject to review, depending on the evolving revenue
situation. Any efforts to re-prioritize spending over the next year should
ideally take into account the critical areas of LPRS delivery that will be
adversely affected by the crisis as detailed in this report, with particular
attention to public investments in infrastructure and education.
•
HIPC: Rapid progress towards the HIPC completion point is already a
government priority. The global crisis only increases the importance of
this objective. Substantial progress has already been made and the new
PMF legislation is expected to be adopted later in 2009. Nevertheless, it
is important to maintain clear benchmarks for pushing forward on
adopting, and implementing, this crucial piece of legislation.
•
National Employment Policy: Many of the specific details of the policy
areas raised in the report have been, and could be further, incorporated
into the draft National Employment Policy (NEP). Given the centrality
of employment in Liberia’s development strategy, it is important to
move forward in finalizing and adopting the NEP. In so doing, the draft
NEP should be reviewed in light of the findings of this assessment.
•
Emergency Employment: Numerous emergency employment
programmes are currently operating, or have been administered in the
past. In the context of building a National Bureau of Employment, an
audit needs to be performed immediately on (1) the current state of
emergency employment programmes and (2) the new needs due to the
crisis. Given this information, a coordinated and coherent approach to
these programmes can be developed, with technical assistance provided
as needed. In this process, priority should be given to infrastructure
investments, extending the focus beyond road building, to include the
need to rebuild social services (e.g. school construction).
•
Labour Force Survey (LFS): This should remain a top priority. The
lack of detailed labour force information that adequately captures the
entire population heightens the difficulties in developing meaningful
employment policies. The information provided by the LFS would help
accelerate the development of a strategy for informal employment.
2
For the ILO, these recommendations should inform the Decent Work country programming.
The findings of this assessment also suggest that it is important for the ILO to move beyond a
small project-based approach, and extend its programming effort to include technical assistance
and analysis for the formulation of policy responses and national employment strategies.
Liberia Crisis Assessment, 2009
14
The LFS has the potential to generate an unprecedented set of high
quality information for Liberia, and therefore it is essential to ensure that
adequate oversight is provided throughout the survey and data collection
process.
•
Rice production: The Ministry of Agriculture has suggested that a small
number of pilot projects could be launched which revitalize smallholder
rice production in targeted communities through an integrated approach.
These programmes would provide core infrastructure (roads, milling
facilities, storage); resolution of land tenure issues; and technical
assistance (e.g. extension services). Such pilot programmes could then
be fine-tuned and scaled up for a broader impact.
•
Financial sector: The challenge for the financial sector in Liberia is one
of creating the right set of institutions to more fully mobilize the
resources which are already available. As a concrete first step, a task
force on mobilizing development finance in Liberia could be convened:
including the Ministry of Commerce, the Ministry of Finance, the
Ministry of Labour, the Ministry of Agriculture, the Central Bank of
Liberia, the National Investment Commission, and the managing
directors of the commercial banks. The task force would be assigned to
identify concrete initiatives and reforms that remove the constraints to
extending credit for productive investment and to support SMEs.
•
Concession Agreements: In ongoing and future concession
negotiations, it is crucial to ensure that short-term concerns with regard
to the crisis do not have long-run negative consequences in terms of
unfavourable agreements that could affect Liberia’s development
trajectory for decades to come. While negotiations should move ahead
quickly where possible, the government should resist pressure for
unjustified ad hoc crisis related benefits and maintain a long term
perspective in the negotiations.
•
Tree crop investment: The need for support to tree crop investment has
two components: providing resources for replanting of existing crops
and diversification (e.g. the expansion of cocoa). Programmes and
policies exist already to support re-planting and diversification. These
need to be protected and scaled up in response to the crisis. Provisions in
concession agreements that provide assistance for smallholder
investments need to be maintained.
•
Donor support: Given limits to the domestic resources available, many
of these recommendations depend on an effective strategy for sustaining
and mobilizing donor aid. The government has successfully managed to
maintain donor support in light of the crisis. Such efforts must be
sustained and the government should be poised to take advantage of new
opportunities when they arise. Ideally, donors should be persuaded to
Liberia Crisis Assessment, 2009
15
provide an increasing amount of direct budget support to build capacity
within Liberia and to ensure that the advancements made are sustainable.
Liberia Crisis Assessment, 2009
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Liberia Crisis Assessment, 2009
17
1. Introduction
The global economic crisis has made Liberia’s formidable task of
reconstruction, peace-building, and development more challenging and has
compromised the goal of expanding decent employment opportunities and
reducing poverty for the country’s 3.5 million people. Employment is central to
the process of post-conflict recovery, for addressing poverty, creating a
foundation for equitable growth, and re-integrating Liberia’s population into the
productive life of the nation. For this reason, assessing the impact of the global
crisis on employment and livelihoods in Liberia is essential in order to
understand the effect on the country’s reconstruction efforts and development
strategies, as reflected in the Liberia Poverty Reduction Strategy (LPRS), Lift
Liberia, adopted in 2008.
The ILO, in collaboration with other development partners has been
requested by the Government of Liberia to undertake a rapid assessment of the
global economic crisis and its impact on employment in Liberia.3 The
assessment documents the effects on employers and workers and considers
these impacts in terms of their implications for the realisation of the objectives
of the poverty reduction strategy and within the overall economic context. This
report is a compilation of the major findings of the components of the
assessment related to growth, trade, the macroeconomy, investment, strategic
sectors, and employment. In addition, the report analyses the scope for policy
interventions and suggests a number of strategic responses.
The assessment found that the global economic crisis already has had
serious impacts on employment, government resources, foreign investment, and
the overall development trajectory. The crisis has adversely impacted public
revenues, which constrain the ability of government to deliver on components
of the LPRS. The expected growth path has come under pressure due to the
collapse of global demand, creating sizeable barriers to revitalizing the
economy, including increasing exports of natural resource based products. This
is affecting the on-going negotiations and implementation of concession
agreements. The crisis is having a substantial negative effect on employment
and the impact will be felt most strongly by the hundreds of thousands of
individuals self-employed in smallholder agriculture and those working in
informal employment.
3
This overall assessment was intended as a background document prepared for key
stakeholders as part of the national Symposium on the Impact of the Global Financial Crisis on
the Liberian Economy held in Monrovia in August 2009.
Liberia Crisis Assessment, 2009
18
The crisis has not only affected existing employment and production, but
has altered expectations of future job creation, economic growth, and
possibilities for development. Given these changes, there is a need to revisit and
more strictly prioritise areas of delivery within the LPRS. In addition to
documenting the impact of the global crisis on Liberia, this report also presents
a number of recommendations for policy responses, based on the detailed
findings and analysis of the rapid impact assessment.
Structure of the report
The next sections of the report provide a brief overview of the economic
and employment situation in Liberia prior to the crisis. This general background
information is important for providing a context for the rapid impact
assessment. In addition, the content of the Liberia Poverty Reduction Strategy
and the draft National Employment Policy are summarised, since these policy
documents provide a framework for a number of the issues which are addressed
in the analysis.
The report then turns to the impact of the crisis, beginning with an
examination of the various channels through which the global crisis is affecting
the Liberia economy. The crisis is often identified as a ‘financial crisis.’
However, in the case of Liberia, the financial sector is not the primary channel
of transmission. Instead, the effects on government revenues, trade, commodity
prices, foreign investment, and remittances are much more important. The
report then documents the impact on employment specifically. There is clear
evidence that the crisis has negatively affected employment opportunities in
Liberia. These effects are detailed for a number of strategic sectors: rubber, rice,
palm oil, iron ore, timber, and gold.
In the final sections of the report, possible policy responses are explored.
The space for using traditional macroeconomic policies to counter the crisis is
extremely circumscribed in Liberia. Nevertheless, some possibilities exist for
making the most of what resources are available – e.g. working with the
banking sector to mobilise additional credit. The report also examines labour
market institutions, emergency employment policies, and the need for social
dialogue in the context of the crisis. The report concludes with a summary of the
suggestions from the rapid assessment in terms of short-term responses and
longer-term strategic priorities.
Liberia Crisis Assessment, 2009
19
2. Methodology
The ILO has developed a guide for Country Level Rapid Impact
Assessment of the Crisis on Employment4 that provides a guiding framework for
analyzing the impacts of economic crises. The framework considers the effects
of the crisis at the macro level, in key sectors, on employment and the labour
market, and, perhaps most importantly, on households and the well-being of the
population. This framework was adapted and used for the rapid assessment in
Liberia.
If the rapid assessment is to uncover timely information, it cannot wait
for official statistics and secondary data to become available. This challenge is
more profound in a country like Liberia, with extremely limited employment
and labour force information. Therefore, the rapid assessment relied on worker
and employer interviews; consultations with policymakers, key informants, and
other stakeholders; and descriptive analysis of existing quantitative data.
Because of the lack of detailed economic and labour force information,
economic modeling exercises were not used. Information on the impact of the
crisis was collected through a series of missions to Liberia over roughly 2
months (with much of the research concentrated in June and July, 2009). The
assessment team gathered information in stages, with a subset of the team
working in-country at any one time throughout this period. Two national
consultants also assisted with the assessment.
Worker and employer interviews and focus group discussions
Prior to undertaking interviews, the ILO sought collaboration with the
National Tripartite Council (NTC) to identify a list of key enterprises to
interview. The NTC originally proposed two to three companies in eleven
sectors (rubber, oil palm, timber, roads, mining, energy, petroleum,
communications, finance, business and rice). However, due to time constraints
of conducting the interviews within a three week period and other issues,
interviews were held with roughly two employers in each of the nine sectors,
leaving out petroleum and communications. Focus group discussions were also
held with workers in these nine sectors, in addition to seafarers and port
workers.
Employers
A select group of companies in a variety of sectors were chosen through
a consultative process with the Liberian National Tripartite Commission. The
4
ILO Employment Sector, 2009.
Liberia Crisis Assessment, 2009
20
discussions with private sector companies focused on the impact of the
economic crisis on the companies and their sector, their reaction and mitigation
strategies (with a focus on employment) and their expectations for the future.
One-on-one discussions with plant managers, human resources managers and/or
other responsible and knowledgeable persons focused on these issues. The idea
was to hear the ‘story’ of the crisis as they perceived it and how it is impacting
on their operations. In addition, we asked companies to prepare, in advance of
our visit, relevant data and information.
Overall 19 key informant discussions were held, often with multiple
informants, representing major enterprises operating in Liberia. A few
companies were not cooperative when asked for meetings and limited support
was provided by employers’ associations to gain access. The questionnaire is
included in the appendix – the major issues discussed are as follows:
•
•
•
•
Company information: name, location, domestic and international sales,
employment structure, and contact details for follow-up questions.
Impact of crisis: magnitude of the impact of the crisis, channels through
which the crisis affects the company (overseas demand, prices, inflow of
investment, access to finance, etc.), situation of the company compared
to competitors and within its parent company if applicable, specific
factors that make the impact of the crisis more or less severe in Liberia,
and expectations of the situation in the coming months.
Trends in key variables: changes in sales and orders, employment,
selling price, investment, expenditure on training, profit, exports, and
capacity utilisation.
Mitigation strategies: Measures that the company has already adopted or
is planning to deal with the crisis, including cost-cutting, postponing of
investment, lay-offs and hiring freezes, etc. Assistance
required/requested/received from the government.
Workers
Meetings with more than 110 employed and unemployed workers in a
variety of sectors were held separately from employers and facilitated in most
instances by the trade unions. Ideally, an attempt was made to interview the
workers of companies where management was also interviewed. However, due
to a variety of circumstances this was not possible in all instances. Discussions
were held through focus groups and by key informants. Individual interviews
were done in select cases to deepen the understanding of the impact at the
household or worker level. The meetings examined how the crisis was
impacting workers, their work and their households, and the coping mechanisms
adopted. Guiding questions for focus group discussions are in the appendix.
Liberia Crisis Assessment, 2009
21
Consultations with Policymakers, Key Informants, and Other Stakeholders
Meetings were also held with relevant government bodies including the
Ministries of Labour, Commerce, Agriculture, Finance, and Land, Mines and
Energy (MLME), the National Investment Commission, the Bureau of
Concessions, the Central Bank, and the Forestry Development Authority. A list
of organisations, ministries, and agencies that were interviewed is included in
the appendix.
Analysis of existing quantitative data
When possible, quantitative data was used to document general
economic trends, the structure of employment, and changes in the economic
situation during the crisis period. Such data is limited in Liberia, prohibiting
more complex analysis. Therefore, when quantitative data is used in the
assessment, we restrict ourselves to a simple descriptive presentation of the
information. Survey information on current employment trends is not available.
Therefore, the assessment focused on the impact of the crisis on employment in
larger enterprises based on a detailed review of recent government records in
which information on employment is available. We discuss the findings of the
analysis of government records later in the report.
Liberia Crisis Assessment, 2009
22
Liberia Crisis Assessment, 2009
23
3. A brief overview of Liberia’s
economy before the crisis
When the global economic crisis first unfolded in the second half of
2008, Liberia was in the process of recovering from decades of political
instability and civil war – conflicts which destroyed infrastructure, lead to the
widespread collapse of social institutions, and had a devastating impact on the
country’s economy. The conflicts also had a dramatic impact on the country’s
human resources – through lost opportunities for education and training among
a sizeable portion of the population. Many of the causes of these past conflicts
remain unresolved: disputes over land distribution and tenure, food security –
particularly in terms of the availability and affordability of rice, and control over
the country’s natural resource wealth. The conflict ended in 2003 and, in 2006,
a new government was democratically elected. The task of post-conflict
reconstruction remains formidable and the global crisis adds to this challenge.
The economic impact of the years of conflict is evident. Table 1
summarises average growth rates from 1970 to the present. The period 19802003 includes the years of political instability (beginning with the coup in 1980)
and civil war (ending in 2003). During this period, the Liberian economy shrank
dramatically – often characterised as the most dramatic economic collapse of
any country in the post World War II period. Since the end of the conflict, GDP
growth rates have picked up significantly – reaching 7 to 9 percent following
the 2006 elections. However, growth is expected to slow down to under 5
percent as a result of the global crisis.5
Table 1. Annualized growth rate of GDP, Liberia 1970-2008.
1970-79
2.5%
1980-2003
-5.2%
2004
2.6%
2005
5.3%
2006
7.8%
2007
9.5%
2008
7.1%
Source: World Development Indicators 2008 and IMF (2009).
5
IMF (2009). Liberia: Second Review under the Three-year Arrangement Under the Poverty
Reduction and Growth Facility.
Liberia Crisis Assessment, 2009
24
The economic collapse is particularly pronounced in the trends in
average per capita GDP (Figure 1). At the end of the conflict, in 2003, real per
capita GDP was about a fifth of its average level in the 1970s. Per capita income
began to recover in 1997, with the adoption of the Abuja Accord. However, the
resumption of fighting in 1999 created a further setback to the economy. Since
2003, per capita income has stabilised, but it remains far below the historic high
levels of the 1970s.
Figure 1. Per capita GDP ($1992), Liberia 1970-2008.
$900
$800
$700
$600
$500
$400
$300
$200
$100
Source: World Development Indicators 2008 and IMF (2009).
Table 2 below shows the distribution of projected GDP by economic
sector in 2008. Agricultural activities currently account for the largest share of
Liberia’s GDP – about 42 percent. Production of rice, rubber, and cassava are
the most significant activities within agriculture. Outside of agriculture, the
service sector contributes the most to economic production as captured by the
national accounts. Manufacturing is relatively small, accounting for about 12
percent of GDP. Mining production is quite limited, although new investment in
existing iron mines will alter this situation in the future.
Liberia Crisis Assessment, 2009
25
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
19
74
19
72
19
70
$0
Table 2. Projected GDP by Sector of Activity, 2008.
$1992 US
(millions)
Agriculture and fisheries
$213.8
Forestry
$97.5
Mining
$0.8
Manufacturing
$64.3
Services
$130.7
Percent
42.2%
19.2%
0.2%
12.7%
25.8%
Source: Central Bank of Liberia Annual Report, 2008.
Note: Charcoal accounts for 81% of total forestry output in the above figures.
Exports of natural resource based products have been the cornerstone of
the Liberian economy. Figure 2 below shows historic trends in exports, imports,
and the trade balance from the 1970s to the present. Reliable data for much of
the civil war period is not available. In the 1970s, Liberia had strong export
performance. Imports were roughly in line with exports and the country often
had a positive trade balance. The civil war led to the collapse of the main export
sectors. Since the end of the conflict, the export sector showed clear indications
of recovery. However, imports have also risen and the trade balance has been
negative. The growth of imports has outstripped the growth of exports,
particularly in recent years with the rapid increase in food and energy prices.
Figure 2. Exports, imports, & net trade balance as a percent of GDP, Liberia
1970-2008.
100.0%
80.0%
60.0%
40.0%
20.0%
-40.0%
-60.0%
-80.0%
exports
imports
Source: World Development Indicators 2008 and IMF (2009).
Liberia Crisis Assessment, 2009
26
trade balance
20
08
20
06
20
04
20
02
20
00
19
98
19
86
19
84
19
82
19
80
19
78
19
76
19
74
-20.0%
19
72
19
70
0.0%
Figure 3 shows the current composition of exports, based on 2008 mirror
data (that is, imports of goods and services from Liberia as reported by trading
partners) from the the UN’s Comtrade database. The single most important
commodity is rubber, accounting for 78 percent of the total value of exports.
Other exports – of gold, diamonds, cocoa, and iron ore – account for a much
less significant portion of the total value of exports. Statistics on current exports
in Liberia do not capture the export potential of the country in other
commodities, such as palm oil and timber. Exports of iron ore, for example, are
not related to current production, but rather to existing inventories. We return to
these issues in the sectoral analysis later in the report.
Figure 3. Composition of exports (value), Liberia 2008.
Iron-ore
2%
Diamonds
2%
Other
6%
Gold
3%
Cocoa
3%
Scrap metal
6%
Rubber
78%
Source: UN Comtrade database.
Liberia Crisis Assessment, 2009
27
Figure 4 presents the composition of imports into Liberia, again based
on 2008 data from the Ministry of Commerce as reported by the Central Bank
of Liberia. Liberia currently depends on imports for energy and capital goods.
Rice and other foodstuffs account for about a quarter of the value of total
imports. This represents an increase in the quantity of imported food, but also
the effect of higher global rice prices in 2008. The growth in rice imports raises
important concerns. On the one hand, rice is the staple commodity and
consumers depend on imported rice to supplement domestic production. On the
other hand, rapid increases in imported rice may undermine efforts to revive
domestic production.
Figure 4. Composition of imports (value), Liberia 2008.
15.8%
29.2%
10.0%
25.6%
19.5%
Rice
Other f ood & animals
M achinery & equip.
Petroleum product s
Ot her import s
Source: Central Bank of Liberia Annual Report, 2008.
In recent years, gross investment (i.e. gross fixed capital formation) has
also recovered. As Figure 5 below indicates, gross investment increased from an
estimated 5 percent of GDP in 2001 to over 16 percent of GDP in 2005.
Continued improvements in productive investments are an essential component
Liberia Crisis Assessment, 2009
28
of overall reconstruction and recovery in the country. As we will discuss later,
the global economic crisis will likely slow this trend of growing investment,
particularly for certain critical sectors.
Figure 5. Gross fixed investment as a percent of GDP, Liberia 2001-2005.
18.0%
16.5%
16.0%
14.0%
13.2%
12.0%
10.0%
9.4%
8.0%
6.0%
4.9%
4.7%
2001
2002
4.0%
2.0%
0.0%
2003
2004
2005
Source: World Development Indicators, 2008.
Liberia currently has an unsustainable external debt burden – at the time
of the 2006 elections it was the highest in Africa relative to the size of the
economy. According to the Central Bank of Liberia Annual Report 2008, the
stock of external debt stood at approximately US$ 3.4 billion in October of
2008. Liberia has received significant debt relief over the past few years,
including a significant buy-back of debt at discounted values in April of 2009.
Nevertheless, the debt burden remains unsustainable. Many debt servicing
payments have been suspended, substantially easing the impact of the external
debt in the short-run. Liberia has reached the HIPC decision point and is
currently moving towards its completion point, at which time further debt relief
would be forthcoming.
Liberia Crisis Assessment, 2009
29
4. The employment and labour
market situation in Liberia before
the crisis
Liberia’s population of about 3.5 million is young.6 As Table 3 shows,
over half of the population is under 20 years of age and 30 percent is under 10
years. This age distribution has several important implications. First, the number
of dependents in an average Liberian household is likely to be high. Income
from a single job will have to support many individuals, many of them children.
This increases the poverty risk of households – particularly when access to
employment becomes less stable – and therefore makes the importance of
creating decent employment opportunities more acute. Second, a large number
of youths will have to be integrated into the labour market over time. If
employment opportunities are not available or if young people do not have
access to the opportunities that exist due to lack of skills, social and economic
instability will likely increase. In the case of Liberia, this challenge is made
more difficult by the additional need to re-integrate into the labour market
persons adversely affected by the civil war. Third, investments in education and
skills building are critical for labour market inclusion and the long-run
productivity of the Liberian economy. A shortfall in building human capital
among today’s youth will have negative consequences for the future.
Table 3. Age distribution of the population, 2008.
Age
Male
Female
Total
0-9
30%
30%
30%
10-19
23%
23%
23%
20-29
17%
19%
18%
30-39
12%
12%
12%
40-49
8%
7%
8%
50-59
4%
4%
4%
60-69
3%
3%
3%
70-79
1%
1%
1%
80+
1%
1%
1%
TOTAL
100%
100%
100%
Source: 2008 National Population and Housing Census (NPCH)
6
Population numbers are based on the 2008 National Population and Housing Census.
Liberia Crisis Assessment, 2009
30
Although a national labour force survey is planned for Liberia,
comprehensive labour force statistics are not currently available. In the absence
of up to date and timely labour market data, the most recent information
available comes from the 2007 Core Welfare Indicators Questionnaire (CWIQ)
survey. This survey provides a snapshot of the labour force, but it is important
to recognise that these data were collected through an old sample frame dating
from 1984 and may not represent the precise structure of the labour market.7 We
use the estimates from the CWIQ survey in this overview of the Liberian labour
market.
Table 4 presents estimates of total employment and the employment-topopulation ratio by age group. The employment-to-population ratio provides a
sense of how many individuals, within a particular age group, are employed.
The internationally accepted definition of employment8 includes anyone who
was engaged in an economically productive activity.9 The estimates are
restricted to the working age population (15 years of age or older).
Table 4. Employment and employment population ratios, 2007.
employment (number)
employment/population
Age
M
W
Total
M
W
Total
15-19
80,000
78,000 158,000
52%
52%
52%
20-24
68,000
77,000 144,000
60%
60%
60%
25-29
64,000
75,000 139,000
74%
64%
68%
30-34
56,000
67,000 123,000
80%
74%
77%
35-39
68,000
75,000 142,000
85%
77%
80%
40-44
55,000
52,000 107,000
86%
78%
82%
45-49
56,000
46,000 103,000
84%
81%
84%
50-54
37,000
22,000
59,000
80%
73%
77%
55-59
25,000
15,000
40,000
86%
75%
82%
60-64
15,000
8,000
24,000
68%
44%
60%
65-69
9,000
5,000
14,000
69%
38%
54%
70+
12,000
7,000
19,000
41%
37%
40%
TOTAL 545,000 526,000 1,072,000
71%
65%
68%
Source: CWIQ survey.
Totals may differ slightly from sum of components due to rounding.
7
Some analysts have raised concerns that the Liberia CWIQ survey may not be truly
representative of the population.
8
Employment is defined in the resolution adopted by the 13th International Conference of
Labour Statisticians (ICLS) as persons above a specified age who performed any work at all, in
the reference period, for pay or profit (or pay in kind), or were temporarily absent from a job for
such reasons as illness, maternity or parental leave, holiday, training or industrial dispute. The
resolution also states that unpaid family workers who work for at least one hour should be
included in the count of employment, although many countries use a higher hour limit in their
definition.
9
By ‘economically productive’ we mean any activity whose output would be recognized and
included in the system of national accounts (e.g. GDP).
Liberia Crisis Assessment, 2009
31
In general, the employment-to-population ratio rises with age until
individuals reach their 60s, at which point it drops off significantly.
Employment-to-population ratios are similar for women and men under the age
of 25. After 25 years of age, women’s employment as a share of the population
grows more slowly than men’s. This is explained by a slightly lower labour
force participation rate among these women, most likely due to unpaid childcare
responsibilities in the home. Across the entire population, employment-topopulation ratios of over 80 percent are not uncommon during the prime
working age years, underscoring the critical importance of employment in
Liberia for both men and women. These ratios are quite high by international
standards. In the absence of a social safety net, Liberians have to work if they,
and their families, are to survive, even if working conditions are poor and the
earnings from employment extremely low.
Although rates of employment and labour force participation are high in
Liberia, not all employment is the same. The share of the working poor is
extremely high with more than 85 per cent not earning a sufficient income to lift
themselves and their families above the US$1 a day poverty line. Most
employed Liberians work in small scale agriculture and in informal, nonagricultural activities. These activities tend to be highly precarious with low
productivity and low earnings. Table 5 shows the distribution of employment by
type of employer. Informal non-agricultural employment and employment in
agriculture each account for about 42 percent of total employment – or 84
percent of all employment in the country. Public sector employment comprises
just over 6 percent of the total and employment in NGOs approximately another
3 percent. According to the CWIQ estimates, formal employment in the private
sector amounts to just 5.6 percent of total employment.
Table 5. Employment (15+) by sex and type
employed), 2007.
M
Civil service
42,000
7.7%
Other public
6,000
1.1%
Public corporation
5,000
0.9%
NGO
20,000
3.7%
Cooperative
4,000
0.7%
International organization
6,000
1.1%
Formal, non-agric.
37,000
6.8%
Informal, non-agric.
203,000 37.3%
Agriculture
221,000 40.6%
of employer (including selfF
11,000
2,000
2,000
10,000
2,000
2,000
23,000
251,000
224,000
2.1%
0.4%
0.4%
1.9%
0.4%
0.4%
4.4%
47.6%
42.5%
Total
53,000
5.0%
9,000
0.8%
6,000
0.6%
29,000
2.7%
5,000
0.5%
7,000
0.7%
60,000
5.6%
454,000 42.5%
445,000 41.7%
Source: CWIQ survey.
Liberia’s primary challenge is not necessarily unemployment, but a lack
of decent work as most employed individuals are not earning a sufficient
income to lift themselves and their families out of poverty. It is important to
note that unemployment rate is not a very useful indicator in economies with
Liberia Crisis Assessment, 2009
32
high poverty rates and few social protections. Nevertheless, there is some
controversy around the unemployment rate in Liberia. The international
definition of unemployment requires an unemployed individual to be a) without
work, b) available for work and c) actively looking for work. Individuals are
considered employed if they work for pay, for profit, or contribute to family
income for at least one hour during a specific reference period10. Using the
official definition, the measured unemployment rate in Liberia is 5.5 percent.
According to Table 5, only about 16 percent of all employment can be
considered to be formal paid employment, or about 15 percent of the
economically active population. Since only 15 percent of the labour force is
employed in paid employment, some argue that the unemployment rate in
Liberia is around 85 percent. However, the vast majority of this 85 percent is
actually employed, but working as own account workers and contributing
family workers – vulnerable employment which is typically characterised by
low productivity and very low earnings.11
Table 6 looks at the distribution of employment from another angle – the
sector of activity. Unfortunately, a large share of employment is not classified
by sector in the CWIQ data (listed as ‘other’ in Table 6). Nevertheless, the
information which does exist provides some further insight into the nature of
employment in Liberia. Not surprisingly, agriculture clearly dominates. Outside
of agriculture, services are important, including retail and wholesale trade.
Industry provides very few jobs.
Table 6. Employed persons (15+), by sex and sector of main activity, 2007
Sector
Crop farming
Livestock/poultry
Forestry/logging
Fishing
Mining/quarrying
Manufacturing
Utilities
Construction
Wholesale/retail trade
Transport, storage, comm.
Banking/financial services
Community services
Other
Total
Source: CWIQ survey.
Men
No.
249,00
1,000
2,000
2,000
5,000
2,000
3,000
13,000
25,000
8,000
3,000
57,000
174000
543,000
%
45.9
0.1
0.3
0.4
1
0.3
0.5
2.3
4.6
1.5
0.5
10.4
32.1
100
10
Women
No.
%
255,000
48.5
0
1,000
0.1
1,000
0.2
0.1
2,000
0.3
1,000
0.2
0
48,000
9.2
1,000
0.3
1,000
0.2
17,000
3.2
198000
37.7
525,000
100
Total
No.
504,000
1,000
2,000
3,000
6,000
4,000
4,000
13,000
73,000
9,000
4,000
73,000
372000
1,067,000
%
47.2
0.1
0.2
0.3
0.5
0.3
0.4
1.2
6.9
0.9
0.4
6.9
34.9
100
See footnote 6 for full definition of employment.
Vulnerable employment is sometimes calculated as the number of own-account and
contributing family workers expressed as a proportion of total employment. These two
categories are considered particularly vulnerable in terms of high levels of economic risk and
the weakness of institutional arrangements governing the employment relationship, two
indicators of decent work deficits.
11
Liberia Crisis Assessment, 2009
33
Most employed Liberians have limited educations. Figure 6 shows the
distribution of employment by educational attainment. Nearly two-thirds (66
percent) of employed Liberians have a primary school education or less. There
are clear gender inequalities apparent with regard to educational attainment.
Over 80 percent of employed women have at most a primary education. Across
the employed population, about 30 percent have some secondary education – for
women, the fraction is about 18 percent. This low level of educational
attainment among the working population reduces productivity and the earnings
potential of the population.
Figure 6. Educational attainment of the employed (15+), percentage, 2007.
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Primary or below
(total)
Less than primary
Secondary
(incomplete)
male
female
Secondary
(complete)
Higher/tertiary
total
In summary, most employed individuals work long hours in low-paying,
precarious and low-productivity activities. Only a minority have access to what
could be considered formal wage employment. Own account workers, unpaid
family workers, and those employed as contract workers are often not covered
by basic social protections or labour laws. The lack of decent employment
opportunities is compounded by the large number of dependents that rely on
each employed person – raising the risk of poverty in the absence of any social
safety net. In general, the majority of the workforce is poorly educated with
low skills, which limits labour productivity and the ability to take advantage of
better opportunities when they become available. When examining the impact
of the economic crisis on Liberia, the reality of this structure of employment
must be kept in mind.
Liberia Crisis Assessment, 2009
34
Liberia Crisis Assessment, 2009
35
5. The Liberia Poverty Reduction
Strategy and National Employment
Policy
Lift Liberia: The Poverty Reduction Strategy
In 2008, Liberia released its poverty reduction strategy (LPRS), Lift
Liberia, which describes the government’s primary strategies for growth and
human development over the period 2008-2011. The LPRS is structured along
four pillars:
•
•
•
•
Peace and security
Economic revitalisation
Governance and the rule of law
Infrastructure and basic services
Each of the pillars is composed of concrete policy goals and specific
programmatic objectives. Through this policy framework the LPRS aims to
create the conditions for sustainable and inclusive growth. The growth strategy
outlined in the LPRS has three central components: (1) rebuilding basic
infrastructure, (2) restore production in natural resource products such as
rubber, timber, mining, and cash crops, and (3) encourage diversification of the
economy over the long-term.
As the analysis in this report will detail in much greater depth, the global
economic crisis has important implications for the realisation of the objectives
of the LPRS. The crisis has adversely impacted public revenues, which will
constrain the ability of government to deliver on components of the LPRS,
particularly those which rely on public resources. The growth strategy has come
under pressure due to the collapse of demand in key global markets, creating
sizeable challenges for restoring production in natural resource products. As this
report will discuss at some length, the global recession has had a negative
impact on employment in certain sectors, with important implications for
poverty reduction and social stability. It is difficult to assess the degree to which
the global crisis will ultimately affect the realisation of the LPRS at this point in
time. Nevertheless, it is clear that the global crisis intensifies the challenges
which Liberia faces in terms of realizing its strategic plan for national
development.
Liberia Crisis Assessment, 2009
36
Improving employment opportunities is central to the objectives of the
LPRS. Employment is the primary channel through which the benefits of
revitalised growth will be widely shared. Therefore, it is an essential component
of inclusive growth and poverty reduction. Creating opportunities for all
individuals to participate in the economic life of the country through decent
employment is also essential for sustainable peace and social stability. Good
governance and economic infrastructure are essential for generating
employment and improving the quality of existing opportunities. Basic services,
such as health and education, represent important investments in the country’s
human resources, investments that provide a foundation for future growth.
Access to employment also builds skills and capacity, through labour market
experience and on-the-job education.
The LPRS includes specific policy recommendations and targets with
regard to employment and labour market policies within the pillar ‘economic
revitalisation.’ In many respects, employment is a cross-cutting issue and
policies to support employment are incorporated into strategies for agriculture,
mining, infrastructure, and investment promotion. However, the LPRS also
explicitly recognises the need for improved labour policy and administration, a
role for labour-intensive public works, skills training, developing opportunities
for women and youth, and creating workplace programmes to address
HIV/AIDS.
The National Employment Policy
The LPRS, under the heading ‘generating productive employment,’ calls
for a new National Employment Policy (NEP) to coordinate efforts at improving
employment opportunities in the country. Currently, a draft NEP has been
developed by the Ministry of Labour with technical assistance from the ILO. At
the time of the assessment, the NEP needed to be submitted to cabinet structures
for approval. After it has been approved by cabinet, the house and senate must
pass it in order for the NEP to become national policy.
The draft NEP (April 2009) includes strategies to address immediate
employment needs, through emergency employment programmes, and policies
for sustainable employment in the longer-term. A National Bureau of
Employment is proposed to coordinate employment policies and to integrate
such programmes into the national development strategy. The Bureau would
also link employment creation to infrastructure projects and skills building
initiatives.
The medium-term employment policies in the NEP include a number of
components:
•
•
Skills and capacity building
Revitalisation of agriculture and non-farm rural employment
Liberia Crisis Assessment, 2009
37
•
•
Support to small-scale and informal enterprises
Targeted employment and skills-building initiatives for youth, women,
and the disabled
In many respects, the policy framework of the NEP mirrors the priorities
outlined in the LPRS. Although still in draft form, several of the components of
the NEP, particularly the emergency employment programmes, are relevant to
addressing the negative effects of the economic crisis. We return to these policy
issues later in the report.
Liberia Crisis Assessment, 2009
38
Liberia Crisis Assessment, 2009
39
6. Channels through which the
global crisis affects the Liberian
economy
Central government revenues and the budget
Pressures on fiscal resources, specifically government revenues,
represent the primary macroeconomic channel through which the global crisis
will affect Liberia. The negative impact on government revenues is directly a
result of changes in commodity prices and international trade. In the 2009/10
budget, international trade taxes account for approximately 50 percent of total
tax revenue and ad valorum taxes on imports represent a significant component
of these trade taxes. As noted above, the global crisis has reduced the price of
imports and the total value of all imports into Liberia. Changes in global
commodity prices therefore directly affect government revenues. In addition,
taxes on personal corporate income are projected to account for 27 percent of
tax revenues in the 2009/10 budget. To the extent that the crisis slows the
growth rate of the Liberian economy, revenues from these sources will also
decline. Non-tax government revenues, such as the once-off payments linked to
concession agreements, could also be aversely affected by the crisis, although
the expectation is that these extraordinary revenue items are reasonably secure.
There have been a number of recent changes to tax policy. The corporate
and personal income tax rates have been reduced.12 In addition, import duties on
rice have been suspended. The reductions have been justified as a government
fiscal response to the crisis – i.e. an effort to support domestic demand through
tax reductions. We will examine the efficacy of this approach later in the
discussion of policy responses.
The negative impact of the crisis on government revenues has been
partly off-set by efforts to increase the efficiency of tax collection. Total tax
revenues in the 2009/10 draft budget were projected to be 17 percent higher
than the 2008/9 projection, although there is some concern that actual revenue
collection will fall short of planned revenues due to the crisis. The measures
undertaken to improve tax effort include improvements in import inspections,
new systems to minimise false receipts and similar tax avoidance strategies,
12
According to the President’s Budget Message for the 2009/10 budget, the expected revenue
loss due to the reduction in the corporate and personal income tax is $14 million.
Liberia Crisis Assessment, 2009
40
better enforcement of tax payments by government employees, and greater
effort in collecting property and general sales taxes. Although these changes
help compensate for the impact of the crisis on government revenues, revenues
would certainly be higher in the absence of the global recession. Moreover,
these figures represent revenue projections – actual collections will depend on
how the crisis plays itself out.
The impact on government revenues is critical because Liberia currently
runs a cash-based budget – current expenditures must not exceed revenues plus
any cash reserves. In the past several years, government revenues had exceeded
expenditures, and a cushion of reserves was built up. However, those reserves
are largely exhausted. Therefore, a significant decline in realised revenues will
necessarily lead to cuts in expenditures. Liberia does not currently issue
government securities and new domestic debt. There are efforts to establish a
domestic capital market, but it will be some time before government securities
can be issued. In the meantime, fiscal space is limited to the ability of
government to mobilise revenues. To the extent that the global crisis reduces
revenues, government’s policy space – independent of donor support – will be
squeezed.
Exports, international commodity prices, and exchange rates
The decline in global demand and the rapid drop in commodity prices
represent the most significant channels through which the global crisis directly
affects the Liberian economy. The value of rubber exports has declined, both
due to a reduction in the quantity of rubber exported and the dramatic fall in
global prices. Other commodity prices – for example, of iron ore, palm oil, and
diamonds – have also fallen. These other commodities currently constitute a
relatively small fraction of the total value of Liberia’s exports. However,
significant increases in the production of iron ore, palm oil, and timber were
expected to have occurred by now or to accelerate in the near future. The global
crisis has caused a delay in the rejuvenation of these exports. One consequence
of the global crisis, therefore, is a slowdown in new investment and rates of job
creation that fall short of expectations. These issues are discussed with much
greater precision in the sectoral analysis of the report.
In 2008, the estimated value of total exports was about 31 percent of
GDP. Figure 7 shows the trend in Liberian exports to the U.S. and E.U.,
measured in millions of U.S. dollars, from May 2008 to May 2009 (the export
figures are based on ‘mirror’ data and represent the value of Liberian imports
into the U.S. and E.U.) The value of exports varies significantly from month-tomonth. Therefore, the figure includes the actual value of exports and a 3-month
moving average of the value of exports. The 3-month average helps to smooth
out the month-to-month variations and make the overall trend clearer. There has
13
13
IMF (2009). Liberia: Second Review under the Three-year Arrangement Under the Poverty
Reduction and Growth Facility.
Liberia Crisis Assessment, 2009
41
been a significant decline in Liberian exports to these two major markets,
starting around October 2008. At this time it is uncertain whether exports will
rebound from this recent decline or whether the fall in exports will be longterm.
Figure 7. Trends in the value of Liberian exports to the U.S. and E.U. (US$),
mirror data, January 2006 to May 2009.
$25.0
$20.0
$15.0
$10.0
$5.0
M
Ja
n06
ar
-0
M 6
ay
-0
6
Ju
l-0
6
Se
p06
N
ov
-0
6
Ja
n07
M
ar
-0
M 7
ay
-0
7
Ju
l-0
7
Se
p07
N
ov
-0
7
Ja
n08
M
ar
-0
M 8
ay
-0
8
Ju
l-0
8
Se
p08
N
ov
-0
8
Ja
n09
M
ar
-0
M 9
ay
-0
9
$0.0
exports (US+EU)
3 month moving average
Source: UN Comtrade database.
The decline in exports corresponds to a drop in the nominal exchange
rate (Liberian dollars to U.S. dollars). Table 7 shows the end-of-month
exchange rate from May 2008 to May 2009. The exchange rate was stable up
until the end of 2008, but then began to depreciate. The depreciation became
more pronounced in April and May 2009. For many economic activities, the
widespread use of U.S. dollars means that the depreciation of the Liberian dollar
would not have had a significant impact. However, small enterprises and
individuals in informal self-employment may have been adversely affected,
particularly if goods and inputs are purchased with U.S. dollars but the majority
of their sales transactions are in Liberian dollars.
Liberia Crisis Assessment, 2009
42
Table 7. Nominal exchange rates(end of period),
May 2008 – May 2009.
Exchange rate
$L/$US
May 08 63.5
Jun 08 63.5
Jul 08
63.5
Aug 08 63.5
Sep 08 63.5
Oct 08 63.5
Nov 08 63.3
Dec 08 64.0
Jan 09 64.5
Feb 09 64.5
Mar 09 65.5
Apr 09 66.5
May 09 70.5
Source: Central Bank of Liberia, Fact Sheet on Key Economic and Financial Indicators,
various months.
The crisis led to the closing of the external credit lines which contributed
to the decline in the exchange rate. Importers rely on trade credits to finance
their transactions. When overseas credit lines became less accessible, they
turned to domestic sources of trade credit. Demand for U.S. dollars within
Liberia increased, and this would have contributed to a depreciation of the
nominal exchange rate.
The impact on commodity prices also extends to import prices –
including imports of fuel and rice. The fall in import prices generally represents
a gain for Liberian households but, as we have already discussed, the reduction
in prices has direct consequences for government revenues. The decline in
import prices helps to off-set the decline in export revenues in terms of the
overall trade balance. Lower import prices have also reduced the inflationary
pressures that were evident in the second half of 2008. In particular, the global
crisis appears to have put an end to the rapid increase in rice prices that was
placing pressures on the living standards of families and households.
However, there is a downside to the recent moderation in rice prices.
Rice is arguably the most important commodity that Liberia produces and the
volatility of prices could affect efforts to revitalise domestic rice production and
may also dampen domestic production in a sector that holds key potential for
jobs, national food security and household welfare.
Liberia Crisis Assessment, 2009
43
Foreign direct investment and concession agreements
In 2008, net foreign direct investment in Liberia amounted to about 24
percent of GDP.14 Foreign investment is concentrated in natural resource based
exports – rubber being the most important – and a large share of foreign direct
investment is linked to concession agreements that are negotiated with the
government. During the commodity boom that preceded the global economic
crisis, commodity prices and expected profits were high. It was envisioned that
new concessions would come on board, based on Liberia’s resource
endowments – e.g. involving the production of iron ore, timber, rice, and palm
oil. Some companies that won concessions have delayed investments because of
the collapse of global commodity prices or difficulties to obtain finance. In
some other cases, the terms of the concession agreements that are currently
being negotiated may be less favourable than had originally been expected. A
much more detailed discussion of the various concession agreements and the
impact of the global crisis can be found in the sectoral analysis of this report.
The rapid impact assessment found that the crisis is having an impact on
concession negotiations and investment through its effect on world market
demand and availability of long term finance for investment projects in several
crucial sectors. However, it also found that in a number of cases, the crisis is
simply adding to pre-existing domestic problems or is being used as a
bargaining tool by potential investors. These findings strongly argue against
granting ad hoc benefits to investors affected by the economic crisis. Instead, a
more advisable strategy is a dual approach of continuing to improve the
investment climate and maintaining a strong emphasis on attracting reputable
and financially sound companies to carry out long term investments.
The foreign direct investment associated with the concession agreements
brings a number of benefits to Liberia. Such investment creates much needed
employment. In addition, many of the concession agreements also require the
corporation that wins the bid to invest in infrastructure (e.g. roads and
revitalised rail lines) and areas of social development (e.g. schools). In some
cases, the concession agreements include a once-off direct payment to
government. Such ‘extraordinary’ revenue items can be significant – amounting
to about 20 percent of the projected revenues in the 2009/10 budget. The
negotiated agreements also impact government revenues – and hence, the ability
to deliver on core development objectives – in the longer term, through
provisions for royalty payments and corporate income tax rates.15
14
IMF (2009). Liberia: Second Review under the Three-year Arrangement Under the Poverty
Reduction and Growth Facility.
15
The immediate impact of the negotiations of many new concession agreements on current
government tax revenues and royalty payments is likely to be minimal – apart from the once-off
payments which are classified as extraordinary revenue items. In sectors such as iron ore and
palm oil, new production associated with concession agreements is not expected to increase
Liberia Crisis Assessment, 2009
44
A slowdown in foreign investment attracted through the concession
agreements and the pressures for government to accept less favourable terms
represent another channel through which the global economic crisis will affect
Liberia. At the current time, it is difficult to predict with any certainty the
ultimate magnitude of this negative impact. The collapse of commodity prices
has already affected the negotiation and implementation of concession
agreements. It may be the case that the anticipated foreign investment and
employment creation will still be realised, but at a slower pace. Also, it is
important to recognise that not all of the delays in moving the concession
agreements forward can be ascribed to the global crisis. Other factors (e.g. land
tenure issues) have contributed to the difficulty in securing certain concessions
and were core factors in previous conflicts.
Remittances
The Liberian economy receives substantial inflows of remittances. As
the global crisis causes unemployment rates to rise and net worth to decline
among Liberians working abroad, remittances flowing into Liberia come under
pressure. Economic uncertainty can also reduce remittances – if Liberians living
abroad increase their savings in response to economic instability. The Central
Bank of Liberia maintains estimates of inflow and outflows of remittances.16
According to the 2008 Annual Report of the Central Bank of Liberia, over the
11 month period, January to November 2008, recorded inflows of remittances
totalled US$ 884 million – an amount approximately equal to the country’s
estimated GDP. Recent trends in the monthly inflows of remittances are
illustrated in Figure 8 from May 2008 to May 2009. Monthly inflows of
remittances have declined beginning in the second half of 2008, as the crisis
unfolded. As of March 2009, there appears to have been a slight recovery in the
inflows of remittances. However, given the month-to-month fluctuations in the
data, it is hard to say whether inflows will return to their previous levels any
time soon. Also – unrecorded inflows of remittances would not be reflected in
this figure. This creates an added layer of uncertainty in assessing overall
trends.
significantly for several years. Therefore, the impact on revenues through royalties and
corporate income taxes will take some time to manifest itself.
16
Liberia also exhibits large outflows of remittances. Therefore, the net impact on the country
is much smaller than the estimates of inflows would indicate. One source of the outflows is the
large UNMIL presence in the country.
Liberia Crisis Assessment, 2009
45
Figure 8. Inflows of remittances ($US) May 2008 to May 2009.
$105.0
$100.0
$95.0
$90.0
$85.0
$80.0
$75.0
$70.0
$65.0
$60.0
May 08 Jun 08
Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09
Source: Central Bank of Liberia, Fact Sheet on Key Economic and Financial Indicators,
various months.
The decline in remittances will reduce domestic purchasing power and
overall demand in the Liberian economy. Small business and informal
enterprises that cater to the domestic market will be directly affected, since
many of these businesses are in non-tradable (i.e. not exported) service
activities. In addition, lower levels of remittances would reduce aggregate
financial inflows into Liberia and contribute to short-term balance of payments
pressures.
Official development assistance
Table 8 shows recent statistics of total aid expressed as a percent of
gross national income for selected low-income countries. Liberia receives a high
level of official development assistance (ODA) and aid relative to the size of its
economy, compared to other countries at similar levels of economic
development. In 2008, the value of net transfers from donors was estimated to
Liberia Crisis Assessment, 2009
46
be about 130 percent of GDP.17 One possible consequence of the current global
recession is a reduction in development assistance, as high income countries
prioritise pressing domestic concerns over international donor support. Given
the high levels of development assistance, Liberia is potentially vulnerable to a
withdrawal or reduction of aid flows. At this time, donor commitments to
Liberia appear to have been largely unaffected by the global crisis and the broad
consensus is that Liberia will continue to receive the expected level of support
from its major donors over the next year or two.
Table 8. Official Development Assistance and
Official Aid as a Percentage of GNI (2006).
Liberia
Burundi
Afghanistan
Mozambique
Sierra Leone
Congo, Dem. Rep.
Timor-Leste
Rwanda
Malawi
Uganda
Mali
Ethiopia
Zambia
Tanzania
Burkina Faso
Madagascar
Nigeria
Ghana
Senegal
Cambodia
Nepal
Kenya
Vietnam
Bangladesh
Cote d’Ivoire
54.4%
47.7%
35.7%
26.2%
25.7%
25.2%
24.7%
23.6%
21.4%
16.7%
14.9%
14.7%
14.6%
14.5%
14.1%
13.9%
11.3%
9.2%
9.1%
7.6%
5.7%
4.1%
3.1%
1.9%
1.5%
Source: World Development Indicators, 2008.
Although ODA and aid commitments are currently holding up well,
there is no guarantee that the same level of support will continue in the mediumterm. Therefore, it is essential capitalise on current commitments to realise the
immediate development priorities as outlined in the poverty reduction strategy.
Very little of Liberia’s development assistance comes in the form of direct
17
IMF (2009). Liberia: Second Review under the Three-year Arrangement Under the Poverty
Reduction and Growth Facility.
Liberia Crisis Assessment, 2009
47
budget support. In some cases, specialised agencies have been set up within
government to administer donor funds. For example, a special implementation
unit (SIU) within the Ministry of Public Works has been created to oversee
certain infrastructure projects with an aim to build capacity within the
Ministry.18 Other donors avoid channelling aid through government altogether,
preferring direct project management. The record of this ‘project’ approach to
development in achieving sustainable improvements in African countries
remains questionable. More strategic efforts are needed.
Financial sector and financial markets
The Liberian financial sector is not well integrated into the global
financial system. The civil war effectively shut Liberia out of international
financial markets. Banks are the dominant type of financial institution in the
sector, but they have practically no exposure to the assets and financial products
that are at the center of the current crisis. According to the Central Bank of
Liberia, some banks maintain external credit lines at foreign banks that have
been affected to some extent by the crisis, but the banking sector as a whole has
been largely insulated from the global financial turmoil. The banking sector in
Liberia is largely foreign owned, but ownership is mostly regional. The large
international financial institutions at the center of the financial crisis do not have
a significant ownership stake in the sector.
Moreover, the credit extended by the commercial banking institutions is
primarily used to finance international trade. The transmission mechanisms
through which the financial sector impacts the real economy are weak. The
banking sector is highly liquid and is well capitalised, further protecting the
sector from problems that could arise from the global crisis.
The sudden reversal of short-term capital flows – e.g. portfolio
investment – is another channel through which the global crisis can affect
developing countries. A rapid outflow of capital can result in an uncontrolled
depreciation of the currency with devastating impacts on domestic financial
institutions, the liabilities of the public and private sectors, and real productive
activity and employment. Liberia current does not have a functioning capital
market and receives virtually no portfolio investment.
In short, the Liberian financial markets do not constitute a significant channel
through which the economic crisis has affected the economy.
It is also worth noting that many macroeconomic indicators in Liberia
have not been affected by the global crisis. For example, nominal interest rates
have remained relatively constant over the past year (Table 9), another
18
The infrastructure projects that are being implemented through the SIU are largely funded
by the World Bank. Financing for such projects are channeled through the PMFU (Project
Management Finance Unit) housed at the Ministry of Finance.
Liberia Crisis Assessment, 2009
48
indication that the impact of the crisis on the domestic financial sector has been
minimal. Inflation rates have fallen due the reduction in the prices of imports,
particularly food and fuel. As discussed earlier, there has been some downward
pressure on the nominal exchange rate. However, the overall macroeconomic
environment has remained relatively stable.
Table 9. Annual inflation rates and average lending rates,
May 2008 to May 2009.
Inflation
Lending rates
(percent - annual)
(percent - annual)
May 08
19.2%
14.2%
Jun 08
22.0%
14.4%
Jul 08
21.3%
14.4%
Aug 08
26.5%
13.9%
Sep 08
20.0%
15.8%
Oct 08
18.6%
14.3%
Nov 08
15.5%
14.2%
Dec 08
9.4%
14.3%
Jan 09
6.4%
14.1%
Feb 09
7.0%
14.3%
Mar 09
6.9%
14.0%
Apr 09
7.8%
14.3%
May 09
7.7%
14.2%
Source: Central Bank of Liberia, Fact Sheet on Key Economic and Financial Indicators,
various months.
Liberia Crisis Assessment, 2009
49
7. Overview of the Employment
Impacts of the Crisis
The crisis has already had a substantial effect on employment in Liberia.
The findings of this assessment suggest that the impact will be felt most
strongly by the hundreds of thousands of individuals self-employed in
smallholder agricultural production and those working in informal employment.
In the rubber sector alone, the crisis will directly impact the livelihoods of up to
60,000 smallholder producers and thousands of contract workers. The
employment effects of the crisis will not appear to be as severe at this stage as
some may have expected if we only analyse the absolute reduction in the
number of formal, permanent jobs. This underscores that it is essential to
understand the impact of the crisis on Liberians in all forms of employment. For
informal employment, self-employment, and smallholder production, the
impacts on employment and household incomes are harder to assess with
precision because of a lack of information. In these activities, the negative
consequences will most likely manifest themselves in terms of lower and more
uncertain earnings, and higher risks of poverty, rather than a decline in
employment numbers.
The effects on the well-being of the population of this loss of
employment income are more severe, since many dependents rely on the
earnings from each individual in the labour force. When household income is
reduced, it is likely that additional family members will enter the labour market
to bolster family income – often working in small scale farming and informal
trading. The main concern is the inability of the labour market to absorb new
entrants, such as youth, as the economic crisis will tend to increase labour
supply while lowering labour demand, thereby increasing the tendency towards
more vulnerable employment. When supply overtakes demand, earning may
also fall, for example in informal trading. The impact on the labour market will
be to perpetuate and deepen the ‘vicious cycle’ of long working hours, low pay,
and low productivity associated with vulnerable employment.
Two of the natural resource sectors affected most directly by the crisis
are the rubber sector and mining related activities (since actual production of
iron ore has not recommenced). The assessment estimates that over 4,000
workers in these sectors are effectively out of work. The reductions in
employment are concentrated among contract workers. The job losses among
permanent employees are less pronounced. In the rubber sector, about 60,000
Liberia Crisis Assessment, 2009
50
smallholder producers face rapidly deteriorating economic conditions that will
affect their earnings and the viability of their livelihoods in the future.
Outside of the agricultural and natural resource sectors, businesses have
experienced a slump in demand. On average, businesses interviewed have
reported about a 20 percent decrease in turnover from the previous year. For
small scale enterprises and informal workers, many of which operate in the
service sector catering to domestic markets, the fall in demand will decrease
earnings and productivity. This decline in the domestic market will directly
affect many own-account and contributing family workers in terms of their
contributions to household incomes and family well-being – the two
employment categories which provide the vast majority of employment.
Local businesses complain that profit margins are declining due to
intense competition among traders selling the same goods, a possible result of
new labour market entrants working to make up for the loss of household
income. The fall in demand and the higher cost of imports, in part due to the
exchange rate depreciation, has made many petty traders more vulnerable,
leading to increased bankruptcy. Marketers are leaving the tables as they fall
short on cash to maintain inventories, and more women are entering the markets
trying to make up for the loss of family income. Umbrella business
organisations report a substantial drop in their membership dues as a result of
the decline in consumption spending, slower economic activity, and business
failures. In addition, there appears to have been a contraction in the construction
industry because of the global crisis.
The findings of the worker interviews suggest that most Liberians are
feeling the pinch of the current economic crisis. Employed workers are
experiencing additional workloads without extra compensation and are fearful
of losing their jobs at any time. They also help support redundant workers in
addition to their own families. In all households, women play a major role in
supplementing incomes of employed and unemployed male workers, primarily
through informal employment. Such pressures can also lead to decreased school
attendance, as children and youth are needed to assist in the household or
support income generating activities and the cost of school is no longer
affordable. Some workers would return to their villages if viable alternatives
exist there. International migration was not high on the list of coping strategies,
but many workers would relocate within Liberia to find work.
Trade unions are advocating for workers who have been laid off without
receiving back pay or those which have not received benefits outlined in
collective bargaining agreements, but some of these grievances date back prior
to the onset of the global crisis. The patience of some retrenched workers who
have not received severance benefit packages or the wage and salary arrears
owed to them is running out. There have been some strikes and riots in the
rubber industry and the risk of further instability and violence is high if the
government does not facilitate the receipt of worker benefits across the affected
sectors.
Liberia Crisis Assessment, 2009
51
Apart from actual job losses, one negative consequence of the crisis is a
slowdown in the job creation that was expected to have taken place through the
negotiation of the concession agreements. Although many concession
agreements are still on-track – with the notable exception of the timber
concessions – their full implementation may be delayed. Many of these
agreements are central to the Liberia Poverty Reduction Strategy’s goal to
revitalise the Liberian economy and generate productive employment. At this
stage, it is difficult to assess to what extent the economic crisis will affect the
negotiations of new agreements, the renegotiations of existing agreements, and
the implementation of the agreements that have been finalised.
Employment trends from government records
Interviews with workers, employers, and government officials provided
most of the information on the employment impacts of the crisis. However,
these interviews were supplemented by careful research into recent government
documents to shed further light on employment trends. Although timely survey
data on employment in Liberia is not available to assess the impact of the crisis,
information on employment is routinely submitted to the Ministry of Labour
and the Ministry of Finance. As part of the rapid assessment, employment data
for 138 large scale establishments was assembled from these records.
The 138 companies fall into the category of large enterprises which, in
this case, means that their annual turnover is over 30 million Liberian Dollars.19
Although there are more than 138 large enterprises operating in Liberia, not all
companies report their total number of employees to the government. In
addition, employers often do not submit complete employment figures or do so
inconsistently each month. Therefore, information for only a subset of large
enterprises is available. Since information may not be available each month,
documenting trends in employment over the duration of the crisis is not possible
for all firms.
Despite these limitations, the government records do provide us with
additional information on employment trends. For many of the companies for
which data exist, the number of employees is more or less stable over the period
May 2008 to May 2009. That is, there is no evidence from the government
records that there have been significant layoffs among large enterprises in
response to the crisis. However, there are two exceptions: companies in rubber
and iron ore sector. In these two key sectors, there is evidence of a loss of
employment, with most of the lay offs coming from contractors and not from
permanent staff. This data confirms the information compiled from the
interviews.
19
Information on small and medium sized enterprises is also available, but the analysis was
not completed at the time of this writing.
Liberia Crisis Assessment, 2009
52
Liberia Crisis Assessment, 2009
53
8. Sectoral analysis
The following section reviews the situation in six sectors using available
trade data and relying heavily on personal interviews to obtain information,
especially concerning the employment situation and the outlook for concession
agreements. The sectors are rubber, rice, palm oil, iron ore, timber, and gold.
The order in which each sector is discussed depends, first, on the degree to
which the crisis has impacted existing employment in the sector and, second, on
the overall employment potential of the sector (including employment that
would be generated through the expansion of production in the future). In each
case, an overview of the sector is presented, followed by a discussion of
employment issues relating to the crisis and an assessment of the outlook for the
sector. Four of the sectors are primarily export-oriented: rubber, iron ore,
timber, and gold. For rice and palm oil, there is a significant domestic market in
addition to a possible export market.
The strategy for revitalizing the Liberian economy, as outlined in the
LPRS, depends, in part, on a renewal of natural resource based exports. In the
years immediately preceding the crisis, Liberia’s exports had been recovering
from the extremely low levels that prevailed during the years of civil war and
conflict up to 2003. Table 10 shows that, by 2008, the total value of exports had
increased significantly from the level in 2005. In terms of specific sectors, there
are exceptions to the trend of export growth – e.g. iron ore. However, new
production of iron ore has not commenced in Liberia and exports in recent years
come from drawing down existing stocks. Cocoa, gold and diamonds have had
notable increases since 2005. For other commodities – e.g. palm oil and timber
– the export potential is sizeable, but current exports are negligible.
Table 10. Value of exports by commodity ($US), 2005-2008.
2005
2006
2007
2008
Rubber
$171,426
$239,100
$234,017
$265,792
Scrap metal
$7,882
$9,718
$15,147
$19,320
Cocoa
$3,405
$1,272
$2,265
$10,390
Gold
$191
$5
$1,529
$9,733
Diamonds
----$1,546
$7,433
Iron-ore
$24,253
$2,134
$2,960
$5,818
Wood
--$37
$52
$617
Palm oil
$123
$366
$372
$211
Rice
$708
$142
$137
$140
Other
$12,991
$29,650
$11,083
$19,852
Total
$220,979
$282,425
$269,108
$339,306
Source: UN Comtrade database.
Liberia Crisis Assessment, 2009
54
Rubber
Overview
Rubber is currently Liberia’s most important export commodity by far
and the value of rubber exports totaled US$266 million or about 80 per cent of
total exports in 2008. The five largest companies in Liberia operate in this
sector and it is estimated that more than 20,000 people are employed by
commercial rubber farms and up to 60,000 smallholder households are involved
in some way in growing rubber trees. Exports grew modestly in 2008, but with
the onset of the crisis, the world market price for rubber and the quantity of
Liberia’s rubber exports declined substantially. Demand for tires directly
influences demand for rubber, so demand is strongly linked to the health of the
global automobile industry – an industrial sector hit hard by the crisis.
Figure 9 presents selected indicators for the world market price for
Liberian rubber. According to the World Bank’s Global Economic Monitor
database of world commodity prices, the world market rubber price peaked at
US$3.22/kg in June 2008 and then dropped dramatically in the last quarter of
2008 to reach US$1.20 in December 2009. Since then, it has recovered slowly
and reached US$1.69 in May 2009. Predictions from the Global Economic
Monitor suggest that it will continue to increase slowly but remain well below
its peak during the years of the commodity boom.
Figure 9. Selected indicators of world market price for Liberian rubber, US$ /
kg.
20
05
M
20 1
05
M
20 5
05
M
20 9
06
M
20 1
06
M
20 5
06
M
20 9
07
M
20 1
07
M
20 5
07
M
20 9
08
M
20 1
08
M
20 5
08
M
20 9
09
M
20 1
09
M
20 5
09
M
9
20
10
20
12
20
14
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
World market price for rubber (source: Global Economic Monitor)
Annual average world market price for rubber and predicted future price (source: Global Economic
Monitor)
Unit value of EU rubber imports from Liberia (source: Eurostat)
Liberia Crisis Assessment, 2009
55
Trends in European Union rubber imports from Liberia largely confirm
the validity of these world market figures for Liberian rubber, although with a
time lag of about 3 months. This is not surprising given that import data is
gathered at the time of physical importation whereas the world market price is
determined by current buying and selling in the market.
Figure 10 shows Liberian exports to the EU and US both in terms of
quantity and value. The drop in the last few months is significant, not just in
value, but also in terms of the actual quantity exported. In the last three month
with data availability (Feb-Apr 09), exports to the European Union declined by
56 percent in total value and 25 percent in quantity.
Millions of US$ / kg
Figure 10. Value and quantity of Liberian rubber exports to EU and US.
$20
$15
$10
$5
20
05
M
20 1
05
M
20 4
05
2 0 M7
05
M
20 10
06
M
20 1
06
M
20 4
06
2 0 M7
06
M
20 10
07
M
20 1
07
M
20 4
07
2 0 M7
07
M
20 10
08
M
20 1
08
M
20 4
08
2 0 M7
08
M
20 10
09
M
20 1
09
M
4
$0
Value of rubber exports to the US (source: USITC)
Value of rubber exports to the EU (source: Eurostat)
Quantity of rubber exports to the US (source: USITC)
Quantity of rubber exports to the EU (source: Eurostat)
Employment issues
Companies in the sector have reportedly been affected by the 60 percent
decline in prices and have cancelled contracts with suppliers, and these
cancellations have led to some cutbacks in the employment of contract workers.
Estimates at one plantation indicate that up to 2,000 full-time and contractual
workers have been laid off, 25-30 per cent of which are women. Focus group
Liberia Crisis Assessment, 2009
56
discussions revealed that the majority of those laid off were contractual workers
and much easier to release since they are considered to be self-employed.
Smallholder rubber plantations have also been affected and the impact
has led to shut downs or drastic reductions in activity. The Ministry of
Agriculture has indicated that many of the smaller Liberian owned producers
have had to lay off people and significantly downsize their operations. One
manager of a plantation employing 600 people said that he had not yet made
any lay-offs, but was trying to negotiate a 30 per cent wage reduction with his
workers to be able to keep them employed.
Relations with some employers are very tense with unrest on two major
plantations, leading to destruction of a police station at one site and the
vandalizing of another’s fleet of vehicles due to the death of one worker while
in custody of company security. Another major concern on one plantation is the
alleged default of the employer on the collective bargaining agreement of
retiring workers. In one case, a plantation was unable to pay its workers the
salary arrears owned to them – industrial relations deteriorated and the workers
went on strike. The government has agreed to finance the payment of the arrears
in order to prevent any further unrest that could have compromised a new
concession agreement.
Worker interviews suggest that there is increased pressure on employees
due to higher workloads and halting of overtime pay. Some laid off workers are
re-hired on a casual daily-wage basis, without the usual benefits of housing, free
schooling for children, a rice allowance, and medical support. There is a
constant fear of possible layoffs and concern over how workers will make ends
meet. There are also claims of sexual exploitation of female contract workers on
the part of their supervisors.
Outlook
This is a crucial time for rubber because the government is currently
beginning to re-negotiate concession agreements with two of the major
plantations. Furthermore, most rubber trees are approaching the end of their
economic life and major investments in replanting would have to be made now
(including by smallholders) to secure the sectors future. This requires significant
upfront investment because it takes about seven years before a rubber tree can
be profitably utilised. Smallholders depend on the out-grower schemes of the
large plantations to obtain finance and materials for replanting.
In the ongoing concession negotiations, companies have used the crisis
as an argument to push for more favourable terms, and the bargaining position
of the government is weakened given the urgent need to secure employment in
the short-term. Of particular concern is the companies’ resistance to provide
finance and other support to smallholders to replant rubber trees. This should
remain a priority for the government in the concession negotiations given the
importance for rural development and poverty reduction.
Currently,
Liberia Crisis Assessment, 2009
57
negotiations between the government and the rubber plantations are ongoing to
establish a rubber fund for that purpose that would be funded jointly by all
companies and the government. However, the specifics of the funding
arrangements and timing remain uncertain.
Because of the crisis and the recent price fluctuations, there is a lot of
insecurity, especially among smallholders, whether to invest into replanting of
rubber trees. Some smallholders are said to have already chopped down their
rubber trees to plant other crops instead. There is an urgent need to reassure
investors of the future of the sector for them to make necessary investment
decisions now. If the planned rubber fund becomes available soon and starts
moving forward aggressively, it could serve this purpose. On the other hand, it
is not clear that rubber is the most favourable option for all smallholders and
diversification into new export crops would also help to manage the risk
associated with fluctuating rubber prices. The Ministry of Agriculture, together
with donors, is already supporting programmes to help smallholders move a
portion of their production into cocoa. This represents a concrete intervention
that could be expanded in response to the crisis and which also contributes to
the goal of diversifying the country’s export base.
Rice
Overview
Rice is Liberia’s most important food crop and has tremendous
importance for food security and political stability in a country where, in 2006,
81 percent of the rural population was found to be vulnerable to food insecurity
and another 10 percent acutely affected by it.20 Since the rice riots of April 14,
1979, it has been considered a political crop21. Regardless of the world market
price, Liberian Presidents have made concerted efforts to ensure that the price of
rice is affordable by the population. As such, the price is determined by
government through the Ministry of Commerce and Industry.
Ad hoc calculations based on figures reported in Ministry of Agriculture
indicate that employment in rice cultivation is currently equivalent to about
380,000 jobs. Given that rice is farmed mainly by smallholders who often plant
a number of different crops, it is reasonable to assume that these jobs will be
stretched among a much higher number of people who are engaged in multiple
livelihood activities. Based on estimates in the same Department of Agriculture
report, if Liberia were to reach self-sufficiency in rice (assuming a constant
labour /land ratio), this would generate the equivalent of an additional 470,000
20
Poverty Reduction Strategy, 2008.
A surge in rice prices in 1979 contributed to Liberia's descent into chaos, sparking riots and a
political crisis leading to the coup d’état that brought President Samuel Doe to power in 1980.
21
Liberia Crisis Assessment, 2009
58
jobs. 22 While these are extremely rough estimates, they demonstrate that rice
cultivation, apart from its importance for food security, has a tremendous
potential for employment creation. It is important to recognise that smallholder
production of rice is often vulnerable employment, dominated by own-account
and contributing family workers. Therefore, policies to support productivity
improvements are needed to increase earnings and improve working
conditions.23
As shown in Figure 11, the Global Economic Monitor reports that the
price for a ton of rice (Thailand, 5% broken) was stable for years at around
$300, but then tripled in 2008 to reach $907 in April 2008. Since then, it has
declined again, but has remained above $500 since reaching the earlier peak and
is showing no sign of returning to its pre-2008 levels.
Figure 11. World market price for rice.
20
05
/
20 01
05
/
20 05
05
/
20 09
06
/
20 01
06
/
20 05
06
/
20 09
07
/
20 01
07
/
20 05
07
/
20 09
08
/
20 01
08
/
20 05
08
/
20 09
09
/
20 01
09
/
20 05
09
/0
9
20
10
20
14
$1'200
$1'100
$1'000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Rice, Thailand, 5% broken ($/ton, source: Global Economic Monitor)
Rice, annual average and forecast, Thailand, 5% broken ($/ton, source: Global Economic
Monitor
22
These ad hoc employment estimates are based on the report: Ministry of Agriculture (2006),
Comprehensive Assessment of the Agriculture Sector. According to the report, there are
currently 104,100
hectares of uplands and 75,000 hectares of swampland under cultivation for rice production. The
labour-to-land ratio is estimated to be 1.8 workers/hectare on upland and 2.6 on swampland. The
same report estimates that in order for Liberia to reach self-sufficiency in rice production, the
area under cultivation would have to increase by another 128,000 hectares of upland and 92,000
hectares of swampland, which, using the same labour-to-land ratios, would mean an additional
470,000 jobs.
23
Productivity improvements may reduce the number of jobs associated with an expansion of
smallholder rice production, but will improve the quality of jobs if smallholders are able to
capture, at least in part, the benefits associated with higher productivity.
Liberia Crisis Assessment, 2009
59
Liberia is currently a net importer of rice. According to the Ministry of
Commerce in 2008 almost US$200 million had to be spent on importing rice,
following the spike in international food prices and the continuing strong
demand that could not be met by domestic production. While the country’s bill
for rice imports can be expected to fall in 2009 given the decrease in the world
market price for rice, it would still amount to about US$150 million if the same
quantity as 2008 is imported at a world market price of US$500 per ton. The
Ministry of Commerce also reported that the government has recently purchased
substantial amounts of rice that should suffice till March 2010 and the
Government of Japan recently donated US$30 million in rice. This contribution
is to be sold on the local market and proceeds channelled back into domestic
agriculture.
There are presently three major Liberian companies importing rice into
the country. Importers noted that they lost close to US$20 million in the first
quarter of 2009, as a result of the dive in the global price of rice per metric ton
and pressures from the government to keep domestic rice prices low. The
companies were subsequently not in the position to pay their suppliers. These
payments have been rescheduled over a period of three years beginning late
2009, but it raises concern over continued access to credit to finance rice
imports into Liberia. Currently, local banks are not able to finance very large
consignments of rice imports.
Employment issues
The largest employment effects in the sector will come from efforts to
revitalise smallholder production. However, there are also examples of largescale rice production that have begun to operate in Liberia. Two companies are
presently engaged in mechanised rice production in Liberia, applying capitalintensive production techniques in a sector that could otherwise generate a
significantly larger number of new jobs. One of these companies reported that
the increase in the price of imported items, especially spare parts and fuel has
constrained operations. As a result, some machines are lying idle, the usage of
fertilisers and herbicides has been reduced, and other cost cutting measures put
in place. No workers have been laid off to date and the company does not
foresee any layoffs in the near future. The company currently has 400 workers,
mostly unskilled, earning average monthly wages of US$100. The company
intends to use the by-products from rice growing to generate energy for a US$
10.2 million rice mill. In spite of the increase in the cost of relevant inputs, they
believe that a 50 kg bag of milled rice will not exceed US$24.00 in the worst
case scenario.
The second foreign-owned company is producing rice in Grand Cape
Mount County on a small parcel of 200 hectares of land given to them by the
government. Little information was provided on the present status of production
except for setbacks due to land tenure issues raised by the host community. In
both companies, the situation of the workers has not changed significantly with
the onset of the economic crisis and the volatility in rice prices.
Liberia Crisis Assessment, 2009
60
Outlook
Rice growing is arguably the most important sector of the Liberian
economy, both in terms of food security and employment creation. The sector is
affected by a number of well-known problems, including undefined land tenure
rights and deficient rural infrastructure, which cannot be attributed to the current
economic crisis. However, even though the economic crisis may have
contributed to reducing the price of imported rice, it also reinforced the urgent
need to create more employment, and rice is probably the most promising sector
of the economy to do this at the required scale in the short run. Thus, the crisis
should not divert attention from the fact that the restoration of rice growing in
Liberia is a top-priority.
The current rice concessions are using a mechanised farming approach
generating less than 1,000 jobs between them. More labour intensive
approaches should be sought for large scale farming, especially considering the
price of imported heavy machinery, fuel and spare parts, and the expertise
required to maintain such equipment operating in remote areas.
Palm oil
Overview
According to the Diagnostic Trade Integration Study (DTIS) of Liberia
carried out in 2008, there are currently some 100,000 hectares under cultivation
for palm oil, approximately 75,000 hectares in smallholder production and the
rest cultivated by medium size Liberian owned firms. Liberia currently produces
about 35,000 tons of crude palm oil and imports another 7,000. There are no
reliable estimates of total employment in the sector, but a rough calculation
suggests that employment equivalent to 15,000 full-time jobs exists in palm oil
cultivation.
There are currently no significant palm oil exports from Liberia but the
sector has major potential for import substitution and export growth. As shown
in Figure 12, after being relatively stable between $400 and $500/ton, the price
for palm oil skyrocketed in 2007 and early 2008, reaching a peak of $1,250 in
March 2008. With the beginning of the economic crisis, it dropped dramatically
and in November 2008 reached a low point of $488/ton, but ever since, it has
been recovering steadily, climbing to $800 again in May 2009. Projections from
the Global Economic Monitor see the price of palm oil making a gradual
recovery over the next several years.
Liberia Crisis Assessment, 2009
61
Figure 12. Selected indicators of world market price for Liberian palm oil, US$
/ ton.
20
05
/0
20 1
05
/0
20 5
05
/0
20 9
06
/0
20 1
06
/0
20 5
06
/0
20 9
07
/0
20 1
07
/0
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07
/0
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08
/0
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/0
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/0
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/0
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/0
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/0
9
20
10
20
14
$1'400
$1'300
$1'200
$1'100
$1'000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
Unit value of EU imports from the world of palm oil for food preparation (US$/ton, source:
Eurostat)
Average annual world market price for palm oil and forecast (US$ / ton, source: Global Economic
Monitor)
World market price for palm oil (US$/ton, source: Global Economic Monitor)
Unit value of EU imports from the world of palm oil for technical use (US$/ton, source: Eurostat)
The analysis of unit values of EU imports of palm oil roughly confirm
these numbers with a lag of about 3 months (given that Liberia is currently not
exporting palm oil to the EU, this is based on imports from all trading partners).
Import figures for palm oil from the EU have been volatile over the course of
the crisis. Imports in the first three months of 2009 are 2 percent below the same
quarter of the previous year in value terms, but 31 percent higher in quantity
terms.
Employment issues
The initial impact of the crisis on the industry was reduced oil
production in response to lower global demand. The negative impact of the
crisis has been significant for local producers. However, domestic prices are still
high in range of L$ 1,200 - 1,500 (US$ 17 - 21) per five gallons due to a chronic
West African supply gap that has been filled to date by Malaysian imports.
Liberia Crisis Assessment, 2009
62
Liberia is in a strong competitive position to meet local and regional demand
due to lower transport costs. Global oil demand is also bouncing back with
higher world prices expected over the next six months because palm oil is one
of the lowest priced food oils to produce and remains profitable at lower prices.
The impact on workers is mixed, and appears to vary from employer to
employer. One company, which is in the pre-operational phase, has retained all
of its workers. Another company, which has mainly rubber activities, is
dormant. It will be scaling up its operation soon, with potential to create around
15,000 employment opportunities over the next five years. However, small scale
operations continue and help supply the local market.
Outlook
There are currently four concessions for large palm oil plantations to be
set up in Liberia, but they are not yet operational. There is strong investor
interest in the sector. One investor, which is taking over an older rubber
plantation, is diversifying 80 per cent of its US$ 849 million investment into
new oil palm plantations, a vegetable oil processing factory and social
infrastructure while it replants a portion of the old rubber plantations. Total
acreage awarded in the concession agreement is 220,000 hectares in Bomi, Cape
Mount, Gbarpolu and Bong counties. The company has pledged to improve and
centralise social services and to carry out development activities as a means of
improving community relations. Total employment potential is estimated to be
upwards to 30,000 workers for both palm oil and rubber. This concession
agreement was recently approved by the legislature.
Given that the world market price has already recovered substantially
and the outlook remains bright (even if the peak-prices from early 2008 are
unlikely to be achieved again in the short run) these investments are expected to
move ahead as planned. There is currently no potential for concession holders to
threaten lay-offs given that investments have not started yet, which puts the
government in a much stronger bargaining position in future negotiations.
However there is a need for infrastructure investment to facilitate the
transportation of the projected output from all the concessions under
consideration.
Iron ore
Overview
Liberia does not currently produce iron ore, but there are two
international companies holding mining concessions and a third one is currently
being auctioned. One company has already begun its investment and is
expecting to start shipping iron ore in 2011, the other one is supposed to
commence operations later this year.
Liberia Crisis Assessment, 2009
63
As Figure 13 shows, the world market price for iron ore has been
affected by the economic crisis. The Global Economic Monitor only reports an
annual price for iron ore. This is probably because the reference price for iron
ore is determined every year through negotiations between the major suppliers
and the steel mills that buy the raw ore. The Global Economic Monitor data
reports that after increasing to $140 a ton in 2008, the price fell to $100 in 2009
and it is expected to decline further to $80 in 2010 and $75/ton in 2015, which
is comparable to its level in 2005.
Figure 13. Selected indicators of world market price for Liberian iron ore, US$ /
ton, and steel prices (Index, 1990=100).
$260
$240
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
$400
$350
$300
$250
$200
$150
$100
$50
20
0
5/
20 01
05
/
20 05
05
/
20 09
06
/
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06
/
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06
/
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07
/
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/
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/
20 09
09
/
20 01
09
/
20 05
09
/0
9
20
10
20
14
$0
Unit value of EU imports from the world of iron ore of the type exported by Liberia before
the war (US$/ton, source: Eurostat)
Average annual world market price for iron ore and forecast (US$ / ton, source: Global
Economic Monitor)
World market price of steel (index, 1990=100, source: Global Economic Monitor)
Unit values for EU iron ore imports (from the rest of the world) of the
same type exported by Liberia before the war show a parallel trend, although
the price generally falls a bit below the world market price. This is probably due
to the fact that this data refers to non-agglomerated iron ore, which is what
Liberia exported before the war, which typically commands a lower price. It is
reasonable to assume a lag of about three month between the spot price on the
world market and the unit values reported for these imports by the EU. After
reaching a peak of $116/ton in December 2008, unit values dropped to $89 in
March 2009.
Liberia Crisis Assessment, 2009
64
The main driver for the world market price for iron ore is the demand
and price for steel. In the case of Liberia, the link is even more direct because
the companies that have acquired concessions for iron ore mining in Liberia so
far are steel companies mining their own raw materials. Figure 13 also shows
the world market price for steel which, after peaking at 341 percent of its 1990
level in August 2008 has declined constantly ever since and reached a level of
214 percent of its 1990 level in May 2009.
Import data from the EU, presented in Figure 14, show a dramatic drop
in demand after the beginning of the economic crisis. After being relatively
stable in quantity terms between 2005 and early 2008, imports into the EU
dropped by 55 per cent in quantity terms and 46 per cent in value terms between
the first three month of 2008 and the first three month of 2009. This provides an
indication of the dynamics in one major import market.
$1'500
20'000
18'000
16'000
14'000
$1'000
Thousands of tons
Millions of US$
Figure 14. Value and quantity of EU imports from the world of the type of iron
ore exported by Liberia before the war.
12'000
10'000
8'000
$500
6'000
4'000
2'000
0
20
05
2 0 M1
05
2 0 M4
0
20 5M
05 7
M
20 10
06
2 0 M1
06
2 0 M4
0
20 6M
06 7
M
20 10
07
2 0 M1
07
2 0 M4
0
20 7M
07 7
M
20 10
08
2 0 M1
08
2 0 M4
0
20 8M
08 7
M
20 10
09
M
1
$0
Value of EU imports from the world of iron ore type exported by Liberia before the war
(US$, source: Eurostat)
Quantity of EU imports from the world of iron ore type exported by Liberia before the
war (tons, source: Eurostat)
Liberia Crisis Assessment, 2009
65
Employment issues
Although iron ore production has not resumed in Liberia, the global
financial crisis has had negative impacts on the preparations for future
production, leading to work force reductions and the suspension of road and
railway rehabilitation investments tied to the concession agreements. Interviews
suggest that one company has laid off 80 full time workers and 1,200
contractual workers in Liberia (with 9,000 employees laid off by this company
worldwide). Approximately 80 to 85 percent of the expatriate workforce in
Liberia has been relocated or laid off. The company is currently maintaining a
work force of about 1,000 in Liberia, including 460 full time employees,
security guards and community contractors in order to be ready to bring
operations back to full potential again. Apart from low world market demand
for steel and iron ore, this company is also struggling with cash flow problems
resulting from the global liquidity crunch, the contraction in the availability of
credit, and a drop in the company’s share price.
The current focus is therefore on cost cutting measures and remaining
prepared to scale up activities if the situation improves, but the company is
already delayed in meeting the employment requirements from their Minerals
Development Agreement with the government. The government is monitoring
the situation carefully and is prepared to legally enforce the provisions of the
concession agreement as necessary. The company has submitted a revised
business plan. They are optimistic that the situation will improve in the near
future. If so, they intend to employ 3,500 workers once mining operations
commence in 2011.
Outlook
The company that won the second iron ore concession is supposed to
start operations in Liberia before the end of the year and up to now has given no
indication that they will not do so, but the Ministry of Lands, Mining, and
Energy (MLME) assumes that they are 1-2 months behind schedule. It was
reported that, after winning the bid, the company approached the government to
re-negotiate some provisions of their concession agreement regarding royalty
payments due to the impacts of the economic crisis.
A third mining concession was opened for bidding in 2008 but after the
bids had been concluded, the government conducted due diligence on the
winning company and found that it was not in a financial position to complete
the investment. After some failed negotiations, the concession was re-opened
for bidding in 2009 which seems to have led to some strong bids that are
currently being evaluated by the government. Another company is currently
negotiating with the government about the development of untapped iron
reserves for which the company holds titles. The same company also holds titles
to considerable iron reserves across the border in Guinea and wants to build a
Liberia Crisis Assessment, 2009
66
railroad from there via their Liberian reserves to port. However, the concession
is not expected to lead to any significant investment and employment for
another three years.
World market prices for iron ore are unlikely to reach their 2008 levels
again anytime soon and so a historical window of opportunity for favourable
concession agreements in iron mining has likely passed. However, iron mining
investments have a very long time horizon and will be extremely important
sources of revenue and – to a lesser extent – employment for decades to come.
As companies begin to gear up and if remaining concessions proceed as
planned, employment in the sector at full capacity could reach approximately
8,500 jobs in the next four years. Given the long time horizon of iron ore
investments and the fact that Liberia has been able to attract good offers from
reputable companies even during the crisis, there does not seem to be a need to
accept unfavourable terms in the concession agreements simply because of
current market conditions.
Timber
Overview
Liberia possesses 43 percent of the upper Guinea forest which is
distributed among 14 countries in West Africa from Senegal to Nigeria. The
potential for timber production is substantial, although there are concerns over
the need to preserve the forest’s biodiversity. The timber sector’s contribution
to conflict in the region led to the imposition of sanctions on it by the United
Nation’s Security Council in 2003. In addition, Executive Order #1 cancelled
all timber concessions and contracts in 2006. The government has lost
approximately US$ 150 million in taxes since the sanctions and the sector is no
longer contributing its pre-war US$ 100 million to GDP, including wage
payments of approximately US$ 20 million. This is significant for the overall
economy, and the trade unions estimate that 23,000 jobs were lost as a result of
the sector’s decline.
Exports of timber from Liberia are currently very small, less than US$ 1
million per year. Initial data from the Ministry of Commerce, which has not yet
been confirmed by the statistical office, estimates exports in the first quarter of
2009 to have been US$ 746,000. Most sources agree that there is currently no
significant commercial logging activity except for a few very small concessions
to local companies. Furthermore, no export licenses for timber, required under
United Nations’ provisions, have been issued so far. While this information on
logging activities might be outdated, one possible source for the exports from
the sector could be a special type of wood used for carving that is exempt from
the United Nations’ regulations. Another possibility is that the exports come
from previously logged trees that were abandoned by former owners during the
civil war.
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67
Figure 15 shows indicators of world market prices for timber exports.
The world market price for timber, as reported by the World Bank’s Global
Economic Monitor, appears to have been moderately affected by the crisis.
Throughout 2008, the price was relatively stable around 150 percent of its 2000
level. It declined slightly in early 2009 and is reported to have reverted back to
145 per cent of its 2000 level in May 2009. It is projected to fall again during
2010 to around 135 percent and then make a slow recovery.
Figure 15. Selected indicators of world market price for Liberian timber,
US$/ton and price index (2000=100).
180
$700
160
$600
140
$500
120
$400
100
$300
80
$200
60
20
05
2 0 /0 1
05
2 0 /0 4
05
2 0 /0 7
05
2 0 /1 0
06
2 0 /0 1
06
2 0 /0 4
06
2 0 /0 7
06
2 0 /1 0
07
2 0 /0 1
07
2 0 /0 4
07
2 0 /0 7
07
2 0 /1 0
08
2 0 /0 1
08
2 0 /0 4
08
2 0 /0 7
08
2 0 /1 0
09
2 0 /0 1
09
2 0 /0 4
09
2 0 /0 7
09
/1
0
20
10
20
13
$800
Unit value of EU imports from the world of timber types exported by Liberia before the embargo
(US$/ton, source: Eurostat)
World Market price for timber (index, 2000=100, source: Global Economic Monitor)
Average annual world market price and prediction (index, 2000=100, source: Global Economic
Monitor)
Given that Liberia has not been exporting large quantities of timber
since the civil war, no unit values are available for its own exports. However, it
is possible to analyse unit values for EU imports from all trading partners of
timber classified in the same tariff line as the imports that were reported from
Liberia before the embargo. This indicator shows considerable fluctuation in
2008 ranging from a minimum of US$537/ton to a maximum of US$746. It
reaches a low in February/March 2009 at around US$520/ton which may well
be attributable to the crisis. However, it is a relatively small decline compared to
other commodities.
Liberia Crisis Assessment, 2009
68
Employment issues
It is estimated that 7,000-8,000 people are currently employed in
informal chainsaw logging, supplying the domestic market with wood for
construction. Formal activity in the timber sector is currently resuming after the
end of the U.N. imposed embargo on tropical woods exports. However, stalled
concessions in this sector are slowing expected employment growth.
Pre-war loggers have not been able to pay a trade union estimation of
more than US$ 20 million in salary arrears and severance to workers since 2003
because they have not been given due process to dispose of their assets,
including previous forestry concessions, to enable them settle claims on them by
workers and banks. Many are sceptical about the proposed carbon credit
alternative. The Timber Workers’ Union has been negotiating with government
on behalf of its members but to no avail. They estimate that 52 timber
companies still owe about 19,420 employees. Some former workers indicated
that any new investment could encounter protest actions if workers are not paid
the money due to them.
Outlook
Three rounds of bidding for commercial logging concessions have been
conducted, covering about 40 percent of the total area available for logging. The
first one was in 2008 for 6 small concessions of around 5,000 hectares each.
These are short term concession for 3 years that give the holder the right to clear
the land that can then be used for farming or other purposes. These contracts are
reserved exclusively for Liberian companies. The second round of concessions
was for 3 pieces of land between 60,000 and 120,000 hectares for 25 years that
give the holder the right to manage the forest and log at a sustainable rate.
Concession below 100,000 hectare require at least 51% Liberian ownership,
larger ones are also available for purely foreign investors. These concessions
were cleared by the legislature in May 2009. The last round was held in
February 2009 for 4 large concessions totalling 700,000 hectares and the
resulting bids are currently under evaluation.
The Forestry Development Authority is generally pleased with the
results of the process up to date and is expecting the concessionaires to take up
commercial logging shortly, regardless of the economic crisis. However, other
sources interviewed were more sceptical about the prospects for the logging
sector. They point out that out of the 6 concessions in the first round, only three
could be awarded, and in two of these cases the financial backers pulled out
eventually, so only one of these concessions is actually moving ahead. For the
second round, only one concessionaire is reported to be moving forward while
the other two are held back by financial difficulties. In the third round, the
quality of the bidders is said to be very low.
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69
The financial difficulties of concessionaires may have been aggravated
by the current crisis, but the main problem is failure to attract companies that
have the experience and financial capacity to carry out investments, and this
does not seem to be a result of the crisis. There are a number of issues that are
currently deterring investment from international companies that need to be
understood more clearly and resolved. This would include a review of the
pricing and sizing of concessions that in the past have been found too small to
attract large international investors. Also, logging is a very sensitive sector in
terms of an international corporation’s public image because of environmental
issues and linkages to conflict and corruption in many countries. These concerns
by international companies – whether they are justified with respect to Liberia
or not – need to be addressed, which require considerable marketing efforts by
the FDA. Available estimates of the employment potential of the sector range
up to 9,000 jobs. This is less than half of the level of employment which had
existed in the sector in the past.
Lower global timber prices in response to the drop in global demand
make it even more difficult for companies to start operations in a sector that is
already unattractive to investors because of contract conditions and a new tax
structure which investors find prohibitive. The pre-war land rental fee was
US$0.50 per hectare, but this has been raised to US$1.00 per hectare, with bid
premiums ranging between US$2.00 to US$4.00. Recently a company paid
US$11.50 per ha for 18,000 ha which is considered to be quite high.
Furthermore, in addition to pre-war restrictions that limit logging activity to 4
percent of the total concession area per year, there are new rules on harvesting
practices that include limitations on crossing of waterways and a 30-metre
buffer zone around each waterway. There is a 10 percent stumpage tax and a 10
percent tax on the (FOB) cost of log shipments. Many companies argue that
these regulations are too restrictive.
Gold
Overview
There are currently about 10,000 artisanal gold miners in Liberia but no
large-scale commercial gold mining. Unlike most other commodities, the price
for gold has not been significantly affected by the economic crisis. After
reaching a high of $968/oz in March 2008, it dipped slightly to $760 in
November 2008 only to recover steadily during the following month and
stabilizing above $900 again in Mar-May 2009. Even at its low point in March
2008, it was still substantially above the average level for 2007 ($696). The long
term outlook from Global Economic Monitor has the price decline slightly back
to this level ($700) by 2015.
Liberia Crisis Assessment, 2009
70
Employment issues
All current employment in gold mining is on a small scale artisanal
basis. There are some reports that given the current development of world
market prices, more artisanal miners are moving away from diamonds and have
started looking for gold instead. However, precise information on these smallscale activities is not available.
Outlook
The MLME reports a strong decrease in the activity of companies doing
exploration for all kinds of mining activities (including gold, diamonds, and
coal). A map provided by the geological department of MLME that shows all
ongoing exploration activity lists 34 companies that are currently involved in
different stages of exploration for gold, diamonds and other minerals. Most of
these companies are reported to have scaled down operations or put them on
hold. The primary barrier with respect to gold mining in Liberia is not decreased
world market demand, but rather difficulties in obtaining finance for large
mining operations in a risky environment.
Two companies have already signed Mineral Development Agreements
(MDAs) to mine gold. A United States/Liberian company has a total of four
MDAs, three of which are still pending confirmation by the legislature. The
company is currently undergoing substantial turmoil, but it is not clear that this
can be attributed solely to the crisis. Investment in gold mining had been
expected to begin generating some employment in about three years, but, given
the current situation, this seems unlikely. The second company is still doing
some additional exploration and is expected to start investing in actual mining
in 2-3 years. The potential for employment creation linked to this investment is
not clear.
Despite favourable world market conditions, the prospects for largescale commercial gold mining in Liberia have been impacted by the economic
crisis through the tightening of international credit availability for exploration
and mining. While this is likely to be temporary, it will delay the generation of
employment and substantial government revenue in this sector. A solution could
be to try to attract more solvent large international companies into the sector.
Small-scale artisanal gold mining activity, which is important in terms of
employment, is – if anything – likely to increase at the expense of diamond
mining. However, if the sector does expand, it is also important to recognise
concerns over the health and safety of miners in the sector and any adverse
effects on the environment.
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71
9. The impact of the crisis on
households
Layoffs, reductions in earnings and loss of benefits (including housing,
medical and food supplements) have placed pressures on household resources
and increased the risk of poverty. Private, informal safety nets – in which people
depend on family and friends for support – are financed by employment
earnings. When these earnings decrease, the social safety net weakens. Some
plantations which provide housing permit upwards to 8 dependents for one
worker to live in the housing units. Therefore, if one person loses a job and is
forced out of company housing, nine people become homeless and without
income. Lower earnings have made it difficult for workers to cover their basic
needs, including food. Many workers face considerable uncertainty as to how
long their current employment situation will last, and this additional stress has
been noted as a reason for workplace accidents and lower productivity. Some
redundant workers with disputed and/or unpaid severance benefits or salary
arrears have the added burden of not having capital to establish alternative
livelihoods.
The worsening conditions for informal workers and small-scale
businesses also have broader consequences. The closure of one market table, or
the failure of a retail store, has serious negative implications for the family,
especially women and their children. One key informant for the marketers noted
that the enrolment in the schools for children of market women has fallen.
The effect of the decline in the price of rice on the international and
local market is positive for consumers. Although the price of a bag of rice has
fallen, it is still not affordable by many. The widening parity gap between the
US dollar and the Liberian dollar has led to increases in prices, expressed in
Liberian dollars, of many consumer goods and services. Consequently, the
purchasing power of households has declined, leading to less money spent in the
local economy on goods and services.
Due to higher rates, some customers are not paying their electricity bills,
and the disconnection of these customers has commenced. This reduces access
to electricity for the small minority of Liberians that currently have electrical
services. The lack of running water is another major issue that will most likely
continue to be overlooked during these difficult economic times, stalling
progress for a nation struggling to emerge from its post-conflict situation. The
lack of access to these basic social and economic services contributes to
Liberia Crisis Assessment, 2009
72
economic and social insecurity. It will further limit the productivity of ownaccount workers and small-scale enterprises. For these reasons, greater and
more reliable access to these basic services should remain a priority for
policymakers.
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73
10 Economic Policy Space and
Strategies
This report has documented the negative impacts of the global crisis on
Liberia – with a specific focus on trade, foreign investment, and employment.
We now turn to the question of policy responses, beginning with
macroeconomic and other broad-based strategies. Already a number of
countries have shifted their economic policy positions so as to attempt to
counteract the global downturn. Strategies include fiscal stimulus packages
(through spending, taxation, and public investment policies) and emergency
monetary responses (attempts to increase the liquidity of and restore confidence
in global financial markets). As we have discussed, the channels through which
the recession affects Liberia are different from the ways in which the crisis has
manifested itself in higher income countries. Similarly, the policy response, and
the available policy space, is also different for Liberia. In this section of the
report, we explore these issues.
The policy areas explored in this section also are important in terms of
longer-run policy objectives. Macroeconomic policies directly impact the
quality and quantity of employment opportunities. Macroeconomic policies
support demand in domestic markets and help to create a positive environment
for investment. Through such channels, they raise the demand for labour and
create new employment opportunities. In addition, macro-level policies affect
returns to labour and therefore employment incomes and living standards. For
example, exchange rate policies in Liberia can protect the terms of trade for
self-employed individuals who purchase using U.S. dollars, but sell in markets
using Liberian dollars. Public investment can be used to raise productivity and
improve market access, thereby improving earnings potential. Of course,
complementary policies are needed to insure that Liberians can take advantage
of the improved employment opportunities when they become available –
through capacity building, education, and skills development. Nevertheless, the
policy areas discussed in this section should play a central role in any
employment strategy for the country.
Fiscal Policy
Liberia runs a cash-based budget in which total expenditures must not
exceed the sum of current revenues and any accumulated cash reserves.
Therefore, there is no scope for a traditional expansionary fiscal policy, in
which taxes are cut or spending increased and the resulting deficit is financed
through government borrowing.
Liberia Crisis Assessment, 2009
74
The government has recently reduced corporate and personal income tax
rates and has eliminated the import duty on rice. However, these measures do
not represent a stimulus at the macroeconomic level, since government revenues
will be correspondingly lower and, given the cash-based budget, potential
spending will be less. The net impact on the Liberian economy is uncertain. If
households and companies spend the additional income they have at their
disposal due to the tax breaks on domestically produced goods and services, it
will increase demand in local markets. If the additional after-tax income is spent
on imports or saved, the impact on the domestic economy will be
correspondingly less. In contrast, if the tax breaks were not implemented and
the additional revenues were spent by government, the impact would be
influenced by similar factors: the extent to which government has the capacity
to effectively spend the additional revenues and the degree to which the
spending is concentrated on domestic economic activities.
Although the cash-based budget prevents Liberia from pursuing a broadbased fiscal stimulus, it does not preclude using tax policy to stimulate targeted
investment. For example, strategic tax reductions could be extended to priority
sectors, as long as such policies are consistent with the revenue code. Such tax
reductions could be directly linked to employment creation. Tax policies could
be used to encourage companies to increase their workforces and provide jobs
to Liberians, including vulnerable populations.
The current negotiations (and re-negotiations) of a number of concession
agreements raises concerns over future government revenue collection and
fiscal policy space. The rapid decline in commodity prices has resulted in a shift
in bargaining power away from government and towards the bidders (less of a
sellers market and more of a buyers market). This may affect the terms of the
concession – for example, royalty payments and other streams of future
government revenues from the agreements. In most cases, these negotiations
will not have any immediate impact on current government revenues – with the
possible exception of any once-off payments. However, current commitments
will affect future revenue flows. One strategy that can be pursued is to index
payments to government to the relevant global commodity price. When global
prices recover, government would not be locked into low rates agreed upon
during this time of depressed commodity markets.
Liberia has reached the decision point in the HIPC debt relief process
and now faces a floating completion point. There are a number of reforms,
linked to the HIPC debt relief process, that could be prioritised in order to open
up fiscal space in the near future by reducing the time it takes to reach the
completion point. Most important of these is the passage of the Public Financial
Management (PFM) legislation. This is already a government priority and the
reform is expected to pass later this year. Typically, countries must have the
PFM reforms in place for 12 months before being considered to have reached
Liberia Crisis Assessment, 2009
75
the HIPC completion point.24 However, the Government of Liberia could make
an appeal to move up the completion point. Such an appeal would be contingent
on the passage of the PFM reforms. Similarly, revisions to the country’s
investment code would strengthen the case for moving up the completion
point.25
Moving up the completion point would create additional fiscal space
through several channels. First, Liberia would receive some additional relief in
terms of reducing the servicing costs on its external debt (much of the servicing
costs of Liberia’s debt that would be affected by the HIPC process are already
being covered26). Second, the ability to access concessionary borrowing would
be restored. Finally, reaching the completion point will send positive signals
about the health of the economy to donors and potential investors. For these
reasons, a concerted effort to accelerate the legislative changes need to reach the
completion point would yield important dividends.
Public Investment
One of the most significant factors limiting the revitalisation of Liberia’s
economy is the lack of basic infrastructure – including critical areas of social
infrastructure, such as the construction of schools and clinics. This is widely
recognised. Poor infrastructure lowers productivity, raises costs, and limits
competitiveness on global markets. This reduces foreign and domestic
investment. Lack of transportation, electricity, storage, and processing
infrastructure is perhaps the single most important constraint for small-holder
agricultural producers. Inadequate school facilities compromises public
investments in education and limit the opportunities which Liberia’s young
population will be able to access in the future. Investments in the country’s
human resources are a critical, if more intangible, type of infrastructure.
Without adequate public investment in these areas, economic
development will be seriously compromised. At the macroeconomic level,
public investment operates on both the demand and supply side of the economy.
On the demand side, spending on infrastructure raises demand for inputs and
creates jobs directly. On the supply side, new infrastructure raises productivity,
encourages investment, and, through these channels, helps improve employment
opportunities in the long-run.
24
Interview with IMF residential representative, July 20th, 2009.
One of the triggers for Liberia’s floating completion point is to implement a revised
investment incentive code in which investment incentives could only be extended within the
context of the country’s revenue code.
26
IMF (2009). Liberia: Second Review under the Three-year Arrangement Under the Poverty
Reduction and Growth Facility.
25
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76
Most of the infrastructure projects currently underway in Liberia are
supported through donor funds. However, there have been efforts to prioritise
infrastructure provision by the Government of Liberia in the 2009/10 budget.
For example, the budget of the Ministry of Public Works has increased to
approximately $40 million for the 2009/10 fiscal year. About 80 percent of this
budget is directed towards infrastructure projects.27 This represents a significant
increase over previous allocations. Nevertheless, infrastructure spending in the
budget remains extremely small when compared to the overall need.
In addressing the negative consequences of the global crisis,
infrastructure investment through expanded public works programmes represent
a strategy with both short-run and long-run benefits. In the short-run, such
programmes could be used to provide employment opportunities to those
adversely affected by the crisis, particularly if labour-intensive infrastructure
projects are adopted. Such programmes would leave behind public assets which
would provide benefits to the private sector in the long run. Given the limited
fiscal space – described above – such public investment programmes would
require donor support to help Liberia address the impacts of the crisis. Also –
constraints in terms of capacity, procurement, and delivery would need to be
addressed if such programmes were to be scaled up from their current levels.
Nevertheless, such initiatives represent one strategy to connect short-terms
responses to the crisis to the country’s long-term development goals.
Monetary and exchange rate policies
Monetary policy in Liberia faces a number of constraints which limit its
ability to counteract the effects of the crisis by stimulating economic activity.
One of the main limitations of monetary policy is the highly dollarised nature of
the economy. Many transactions are carried out in U.S. dollars, not Liberian
dollars. The extent of dollarisation is substantial: financial assets and liabilities
are often denominated in U.S. dollars (US$), the national budget is presented in
US$, US$ are used for many routine transactions, and prices are frequently
quoted in US$. Estimates suggest that U.S. dollars account for up to 90 percent
of the money supply.28 However, the Central Bank of Liberia’s monetary policy
only operates on the supply of Liberian dollars. The result of widespread
dollarisation is significantly less control over monetary policy.
Dollarisation represents only one factor which limits the scope for an
independent monetary policy in Liberia. The structure of the domestic financial
sector constrains the Central Bank’s use of traditional monetary policy
instruments. The domestic banking sector is highly liquid and banks hold a
27
Interview with representatives of the Ministry of Public Works, July 22nd 2009.
Eramus, Leichter, and Menkulasi, 2009. De-dollarisation in Liberia: lessons from crosscountry experience. WP/09/37. IMF Working Paper, International Monetary Fund, Washington
D.C.
28
Liberia Crisis Assessment, 2009
77
sizeable amount of excess reserves. Therefore, efforts to stimulate economic
activity by lowering the reserve requirement will have no impact – banks will
continue to hold the same level of liquid assets. Similarly, banks have little
incentive to borrow from the central bank in order to meet their reserve
requirements, since they are already highly liquid. There is no functioning
capital market in Liberia and, as a consequence, no ability to conduct monetary
policy through the purchase and sale of government securities. Instead, the
supply of Liberian dollars is controlled through the buying and selling of
foreign exchange (i.e. U.S. dollars).
Therefore, the conduct of monetary policy in Liberia is closely linked to
exchange rate policy. The Central Bank manages the exchange rate by buying
and selling Liberian dollars. Changes in the exchange rate also impact the
domestic prices of goods exchanged in Liberian dollars. Intervention in the
foreign exchange market is the primary tool for influencing the exchange rate,
the inflation rate, and the domestic money supply. This means that the monetary
policy instruments which Liberia has at its disposal are extremely limited.
The Central Bank has recently used foreign exchange operations to
support the value of the Liberian dollar when the exchange rate began to
depreciate earlier in 2009.29 In this respect, Liberian monetary policy has
responded to one consequence of the global economic crisis. By supporting the
Liberian dollar, the Central Bank helps to shield individuals who use the
Liberian dollar for routine exchanges from the adverse impacts of the
depreciation. There is little additional scope for a monetary response to the
crisis. In the future, if the banking sector extends more credit by reducing its
holdings of liquid assets, if demand for Liberian dollars increases, and if a
domestic capital market is developed, the scope for monetary policy will
expand. Policies that support these institutional changes are desirable since they
will expand the set of tools available to policy-makers. This transformation will
not be realised in the short-term and therefore the role of monetary policy in
responding to the immediate crisis is limited.
Financial sector policies
As discussed earlier, the Liberian financial sector has been insulated
from the negative impacts of the crisis. In fact, the financial sector has
continued to grow and expand despite the turmoil in global markets and the
worldwide liquidity crunch. According to the May 2009 Fact Sheet on Key
Economic and Financial Indicators, published by the Central Bank of Liberia,
total deposits, both in Liberian and U.S. dollars, continue to grow. The ratio of
non-performing loans has declined, down to 15.4 percent of all loans in May
2009. The number of banks has increased over the past few years, as new
players enter the market. Currently, there are 8 banks operating in the country,
with an additional bank expected in the near future. By many standards, the
Liberian financial sector appears healthy and vibrant.
29
Interview with Central Bank officials, July 21, 2009.
Liberia Crisis Assessment, 2009
78
Despite the apparent robustness of the banks, the financial sector plays a
relatively limited role in supporting productive investment and employment in
Liberia. Most of the credit extended by the banks is used to finance imports, not
domestic production. Moreover, the banks have a large amount of excess
liquidity – there are significant resources in the system to extend additional
credit. The liquidity ratio in the banking sector from May 2008 to April 2009
was between 50 and 60 percent – compared to a required liquidity ratio of 15
percent.30 Despite the increasing numbers of banks, spreads between lending
and deposit rates remain large. For example, according to Central Bank data for
May 2009, the spread between average lending rates (14.2 percent) and average
deposit rates on savings accounts (2.0 percent) was 12.1 percentage points.
There are many reasons for the excess liquidity and limited extension of
credit in the banking system. The effective demand for loans is relatively small.
In Liberia, the rate of non-performing loans has been high, and the capacity to
manage credit is frequently limited, particularly among small-scale borrowers.
A lack of sustained information on creditworthiness causes banks to be cautious
and to focus lending on core clientele. Collateral requirements are often very
high in order to protect the banks, but this limits the pool of potential borrowers.
Moreover, demand for loans denominated in Liberian dollars remains limited.
The negative impact of the financial crisis on the domestic economy also
reduces the effective demand for credit to support investment in productive
activities.
Despite these significant constraints, the fact remains that the financial
sector in Liberia has a significant pool of resources which could be much more
efficiently utilised. Given the scarcity of resources elsewhere in the economy,
finding ways of mobilizing these resources to support employment creation and
other development objectives represents an important opportunity.
There are already plans to establish a credit registry and reference
system in order to improve the quality of information that banks have at their
disposal. If such a credit registry were broad-based and included a history of
microfinance loans, this could help reduce one of the barriers to small-scale
lending. Financial sector reforms along these lines should not be based on the
proliferation of microfinance institutions and other alternative finance
institutions. An integrated approach that connects commercial banks,
government programmes, formal regulations, and institutional changes for
administering small-scale loans is required. Government programmes should
support efforts by formal financial institutions to extend credit to productive
activities. For example, complementary capacity building programmes can be
paired with small-scale loans administered through explicit linkages with larger
scale financial institutions. In addition, government programmes could provide
loan guarantees to small scale enterprises and cooperatives that have gone
30
Central Bank of Liberia. Fact Sheet on Key Economic and Financial Indicators, various
months.
Liberia Crisis Assessment, 2009
79
through a formal training programme and have demonstrated a capacity to
successfully manage credit. Such guarantees reduce a portion of the risks which
banks face when making loans and would encourage greater credit extension
and narrower spreads.
Changes in lending practices can also eliminate the barriers to credit
access. For example, one Liberian bank has successfully experimented with
innovative microcredit schemes in which credit is extended to groups in upcountry communities. The bank first identifies groups and associations with
which it can work. These groups and associations include informal traders,
church groups, and small scale savings and credit cooperatives. It then works
with these groups to formalise financial services. The groups open a collective
savings account and this account serves as collateral for making loans. All the
members of the group have a stake in ensuring that any loan is re-paid,
providing an effective mutual monitoring system. The challenge is to scale up
such initiatives to support widespread access to financial services.
The lack of credit supporting agricultural activities has been identified
by the Ministry of Agriculture as a critical issue that needs to be addressed.31
The Agricultural Cooperative Development Bank (ACDB), when it existed,
provided credit to agricultural activities, but did not serve smallholders.32 A
strong case can be made to revitalise development finance in Liberia, and to
extend such services to the agricultural sector. Sustainable approaches can build
on what already exists and could involve establishing agricultural microfinance
institutions, forging linkages between formal banks and informal savings and
credit organisations in rural areas, and developing public-private partnerships to
reduce barriers to extending financial services to under-served areas and
activities.
These strategies for removing the barriers to accessing credit can support
a broader employment strategy. Small enterprises are a significant source of
employment creation in Liberia. Moreover, in terms of sheer numbers,
smallholder agriculture and non-agricultural self-employment represents the two
most important sources of employment in the country. In addition, support for
these activities can support broader objectives, such as food-security (in the case
of smallholder rice production) and diversification of economic activities.
Often, lack of access to capital limits productivity and earnings in these
enterprises and activities. However, access to credit represents only one – and
perhaps not the most important – constraint to improving these employment
opportunities. Therefore, an integrated policy approach, which includes training
and skills development, to assist small-scale enterprises and to improve the
quality of self-employment will be needed.
31
Ministry of Agriculture. 2006. From Subsistence to Sufficiency: Food and Agriculture
Policy and Strategy. Monrovia.
32
The Agricultural Cooperative Development Bank was not sustainable, due to large scale
losses, and collapsed.
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11. Labour market institutions,
employment programmes, and
social dialogue
Emergency employment policies and programmes
The Ministry of Labour is currently engaged in a number of critical
initiatives, including the development of the National Employment Policy
(NEP), the creation of a new National Bureau of Employment, and moving
forward with the revision of Liberia’s labour law – the draft Decent Work Bill.
These institutions and policies will be necessary for realizing the long-term
goals of generating decent, productive employment opportunities as part of the
country’s economic revitalisation. However, the global crisis has hit Liberia at a
time when these initiatives have not been completed and they cannot be relied
upon to address the impacts of the crisis in the short-run. Nevertheless, there are
a number of programmes that are already in place that do have the potential to
address some of the adverse effects of the crisis on Liberia.
An employment strategy that encourages short-term employment is
needed, and some initial work was done, until 2008, through LEEP which
focused on labour-intensive road reconstruction and private sector development
of waste management. This is one programme of many which created
emergency jobs. The challenge is that the efforts are disbursed across many
sectors, and the impact of emergency job creation is therefore dissipated and
requires coordination, consolidation, and clear leadership. The potential of this
is described in the new National Bureau of Employment (NBE), defined in the
draft National Employment Policy. The NBE will be a semi-autonomous body
within the Ministry of Labour, reporting directly to the Minister.
With the global financial crisis, there will be increased demand for short
term income generation and emergency employment programs at a time when
securing funding for emergency employment may become more difficult. Also,
the impact of the economic crisis appears to be uneven across sectors, regions,
and types of employment. Ensuring equitable access to emergency employment
programs will require an assessment of the added need created by the crisis and
potential adjustments to how the programmes have been targeted. In addition,
the crisis will place additional demands on the capacity of the Ministry of
Labour and providers of technical support (e.g. the ILO), if the emergency
employment schemes are to be successful in addressing some of the adverse
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82
impacts of the crisis. Donors and international agencies will need to provide
increased financial and technical support to the new NBE.
Dispute resolution and social dialogue
The global crisis in Liberia has already led to a number of serious
industrial disputes, and these conflicts could grow in the near future if the crisis
continues. Labour inspectors, tripartite bodies, human resource managers,
appointed conciliators and arbitrators, as well as Ministry staff will feel added
pressures to prevent and resolve disputes quickly. Many of these disputes will
probably be about payment and redundancy benefits.
To mitigate these crisis effects on disputes, increased focus will need to
be put on encouraging social dialogue at national, regional, sector and enterprise
levels. In practical terms, this means: setting up social dialogue bodies in key
sectors, making mediation training and knowledge of labour rights more widely
available, and making better transport (such as motorbikes) and
communications facilities (mobile phones and email) available to inspectors,
conciliators and the social partners.
Progress has been made in strengthening social dialogue with the
founding of the National Tripartite Council (NTC). More specifically, under the
Decent Work Bill (yet to be enacted), the NTC will advise and make
recommendations to the Minister on labour issues, participate in the process of
developing codes of conduct and regulations under the Decent Work Bill, and
recommend appointments to the Minimum Wage Board. The NTC will identify
conciliators to assist with industrial disputes that the President considers to be in
the national interest, and will be able to perform other functions as required by
the Minister.
The financial crisis will create more pressure for consultation,
recommendation and intervention. There will be risks of growing mistrust
between the social partners and conflicts over the distribution of national
income as economic growth slows down. There will greater potential for
restructuring of enterprises, worker redundancy and business failures. Most
workers are not represented through the classic social dialogue structures in
place or envisaged because they are part of the informal sector or are selfemployed contract workers. In times of crisis, their voices need to be heard.
Although Liberia has made a good start in improving its institutions of
social dialogue, more work is needed. The capacity of the NTC should be
strengthened to maximise its full potential to promote and sustain social
dialogue. In addition, there is a need to instill transparency and trust between the
social partners and the government. Increased attention should be paid to
encouraging social dialogue at national, regional, sector and enterprise levels.
This requires the establishment of social dialogue bodies in key sectors,
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83
widespread information and training on labour law and dispute resolution, and
the provision of appropriate facilities available to inspectors, conciliators and
the social partners.
Labour inspections
The main impacts of the economic crisis on labour inspection are: (1) an
increase in the number of vulnerable workers; (2) more industrial disputes over
redundancy issues; and (3) more resistance of cash-strapped employers in terms
of complying with labour standards due to the perceived costs of doing so.
Liberia currently has fewer than 50 labour inspectors to promote
compliance with the labour law in a workforce of more than one million people.
Inspection is difficult because the workforce is dispersed and highly
informalised. Although labour inspection is geared to standard, formal sector
jobs, four-fifths of those employed work either in agricultural self-employment
or in informal non-agricultural sectors. Labour inspectors are low paid (about
$70 per month), poorly educated (none are graduates) and poorly trained (no
more than a few days each).
Given the economic crisis and the current constraints in government
resources, there are a number of strategic responses which should be pursued.
Inspection should target sectors and enterprises where advice on compliance
and dispute resolution is most needed – these are likely to be the sectors most
impacted by the crisis. Inspection should be geared to practical advice and
encouragement improvements, rather than pursuing punishment, as a first step.
Finally, inspectors should cultivate a willingness to engage with workers in the
informal economy where compliance may be less important than an ability to
help facilitate practical improvements.
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12. Policy responses and strategies
for addressing the crisis
In the course of the rapid assessment, numerous policies and initiatives
were identified which would contribute to improved employment opportunities
in Liberia and contribute to the LPRS goals of reducing poverty and revitalizing
the economy. In the course of the assessment, the workers and employers
interviewed offered their own policy suggestions and priorities – many of which
correspond to the recommendations which we will discuss in detail below. A list
of these policy suggestions has been included in the appendix.
It is important to recognise that not all of these strategies could be
implemented in the short-run and therefore may not be able to respond fast
enough to address the global crisis. Liberia still faces formidable long-run
challenges in rebuilding the country, re-establishing institutions, improving the
skills and education of the population, and shifting the country onto an equitable
and inclusive development path. The global crisis has added to this challenge
and raised the question of which short-run responses are currently needed in the
context of the longer-term development priorities. Therefore, we discuss shortrun crisis responses separately from longer-term strategies.
Short-term responses to the crisis
A number of short-term strategies emerged during the course of the
assessment that could be used to respond to the adverse impacts of the crisis.
These responses are not new and many reflect current policy priories.
Nevertheless, they can be pulled together into a unified response to the crisis.
Reassess the priorities of the Liberia Poverty Reduction Strategy in light of new
resource constraints and challenges. The crisis will adversely impacted the
planned realisation of the targets and objectives of the LPRS which covers the
period 2008-2011. The crisis has placed pressures on government spending, the
collapse of demand in key global markets has compromised efforts to revitalise
the economy, and employment has suffered with important implications for
poverty reduction and social stability. Fortunately, development assistance is
expected to remain relatively stable in the face of the crisis. Nevertheless, there
is a need to revisit and more strictly prioritise areas of delivery within the LPRS
in order to make the most of the resources which are available. This report has
argued that improving opportunities for decent work should remain a critical
priority.
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Extend emergency employment programmes to those adversely affected by the
crisis. As discussed in the report, numerous emergency employment
programmes are already operating in Liberia. With sufficient donor and
technical support, these programmes can be scaled up to create jobs for workers
displace by the global crisis. Examples have been given in the report. Such
programmes should be linked to investments in infrastructure, including the
labour-intensive construction of schools and roads.
Continue to prioritise the attainment of the HIPC completion point. Reaching
the completion point would help relax Liberia’s fiscal resource constraint by
providing some additional relief in terms of debt servicing payments and
opening up the possibility for concessional borrowing. A prerequisite for the
completion point is the passage of the public finance management (PFM)
reforms. Once this legislation has been adopted, Liberia could request that the
completion point be moved up.
Provide support to smallholders for diversification and investment. As this
report has documented, the economic crisis has hurt smallholders in sectors
such as rubber and palm oil. The squeeze has come at a time when replanting is
critical to ensure future productivity. Programmes to support investments in new
tree crops can help prevent the downturn from undermining the economic
viability of these growers in the future. Provisions in concession agreements
which provide support to outgrowers for replanting should be protected. The
Ministry of Agriculture has worked together with donors to help rubber
smallholders diversify into cocoa. With financial and technical support, such
programmes could be expanded in response to the crisis.
Ensure that on-going concession negotiations do not lock government into
unfavourable terms. The period covered by the concession agreements will
exceed the expected duration of the global crisis. Any deterioration in Liberia’s
bargaining position is likely to be temporary. Therefore, it is important to ensure
that short-term responses to the crisis do not have long-run negative
consequences for Liberia’s development trajectory. In some cases, exporting is
not even going to commence within the expected duration of the crisis and
companies are simply using the crisis as a bargaining chips to get a better deal.
The government will be well advised to resist such pressures and rather risk
delays or re-opening of bids. The planned National Investment Law will be
useful to give the government a stronger stance against pressure for ad hoc
benefits to companies. If unavoidable, explicitly linking temporary benefits (e.g.
reduced royalty payments) to global commodity prices represents one strategy
for making sure that the any crisis related benefits to concession holders are
temporary. Leniency can be granted to concession holders while global markets
are depressed, but then removed once they have recovered. In this way, during
boom periods, government’s share of the country’s natural resource rents would
rise.
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Mobilise the resources of the private financial sector to improve employment
opportunities. The domestic banking sector has the capacity to extend additional
credit which could support productive investments in Liberia. Already, several
domestic banks have created microfinance programmes. These could be
expanded within a coherent framework for financial sector reform, with
government support. Informal and small-scale enterprises face multiple
constraints in Liberia, and providing credit without addressing these other needs
will have a limited impact. There is a need for a coordinated approach which
pulls together small loans, capacity building, and market facilitation. Formation
of cooperatives is another complementary strategy in which savings can be
pooled and business activities made more viable. Not all enterprises will be
prepared to take advantage of micro- and small-scale loan programmes.
However, for those who are ready, such initiatives could help address the
negative impacts of the crisis on small-scale enterprises, the vulnerable selfemployed, and smallholder agricultural producers.
Use social dialogue institutions and processes to resolve conflicts and disputes
arising from the crisis. As has been noted, the potential for increased industrial
disputes and conflicts linked, at least in part, to the crisis is significant. Such
conflicts can be costly in economic, social, and human terms, and processes of
social dialogue can reduce these costs. In anticipation of these growing tensions,
government, along with the social partners, should be prepared to set up, as well
as to strengthen existing, social dialogue bodies where they are needed and to
make effective mediation services available.
The Central Bank of Liberia should continue to stabilise the nominal exchange
rate as needed. The report’s analysis has suggested that a depreciating exchange
rate may hurt low-income households, small businesses, and those in informal
employment. The Central Bank can help prevent a rapid depreciation of the
Liberian dollar by intervening in foreign exchange markets. To the extent that
resources allow, the Central Bank should pursue policies that support the
currency in order to minimise the negative impact. Given the high levels of
dollarisation among larger firms and in international markets, a stronger
Liberian dollar should not compromise the country’s export performance.
Implications for a national employment strategy: longer-term policies
The overarching goal of this assessment is to shed light on the impacts
the global economic crisis has had on Liberia and to suggest viable, short-term
responses. In pursuing this objective, numerous issues emerged from our
interviews and investigations, all of which affect Liberia’s ability to generate
decent, productive employment, but very few of which have simple, short-term
solutions. Many of these issues are reflected in policy documents, such as the
Liberia Poverty Reduction Strategy and the draft National Employment Policy.
The overlap between employment policies and national development strategies
is no coincidence: in Liberia employment is a development challenge, one with
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far-reaching consequences for sustainable poverty reduction and the well-being
of the entire population.
It is beyond the scope of the current report to outline a comprehensive
framework for long-term sustainable employment in Liberia. However, in this
concluding section, it is worth highlighting selected issues which came up in the
course of the assessment.
There is a need for the National Employment Policy and a potentially strong
role for the National Bureau of Employment. A national policy framework for
creating decent jobs and supporting livelihoods is essential if Liberia is to lay
the foundations for equitable and shared growth. Ensuring that the National
Employment Policy is a comprehensive and visionary document with broad
ownership is a good investment. The priorities identified in the Employment
Policy should also be reflected in future revisions of the Liberia Poverty
Reduction Strategy to secure the centrality of employment in the nation’s
development strategy. Strong institutions are needed to implement such a
policy. The creation of the National Bureau of Employment represents an
important step in this direction. With appropriate financial, technical, and
political support, the National Bureau of Employment can coordinate efforts to
improve employment opportunities across Ministries and to implement active
labour market policies to facilitate equitable access to employment.
Revitalise rice production, including among smallholders. Rice is a critical
commodity for Liberia. It is the staple food crop. It has important implications
for social and political stability. And it has an enormous potential for
employment creation. However, there are currently significant barriers to
revitalizing rice production in the country – including land tenure issues, lack of
transportation, storage, and milling infrastructure, access to inputs, and limited
technical know-how. In the course of this assessment, the Ministry of
Agriculture recommended that several pilot projects be launched to improve the
viability of smallholder rice cultivation in targeted communities. This would
require solutions to the land tenure issues, commitments of public investment in
infrastructure, targeted extension services, and, at least initially, provision of
key inputs. If successful, the pilots could serve as a model that could be
replicated in other communities in the country. Such initiatives could be
pursued along with larger scale rice production – ideally using less capital
intensive production techniques than those currently in operation. Cooperative
arrangements between large producers and smallholders would help guarantee a
market for the output of small-scale operations.
Create a development finance system for Liberia. As this report has noted,
Liberia’s financial sector is getting back on its feet and it has a central role to
play in the country’s future. A developmental financial system channels
resources to productive uses and facilitates the management of risks associated
with the process of development. There is a need to create a financial system in
Liberia which supports the country’s growth and development goals. As this
report has suggested, the banking sector has the potential to play a much greater
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89
role in this regard, with appropriate safeguards in place and targeted
government support. Formal commercial banks represent only one type of
financial institution. Informal financial institutions – such as small scale savings
and credit collectives and susu collectors – often provide basic financial services
to those without access to formal banks. Credit to small scale producers could
be scaled-up, if a comprehensive framework for coordinating microcredit
activities is established. However, development finance is not limited to smallscale and micro-credit. Development banks, specialised public institutions that
have been capitalised by government, have played an instrumental role in the
industrial development of many countries by mobilizing large-scale financing
for investment. In the long-term, Liberia could move towards a development
finance system which links commercial banks, micro-finance, small scale credit
unions, and specialised development banks. The components of such a system
could be built step-by-step, beginning with what currently exists. Such a system
would play an instrumental role in creating new employment opportunities and
diversifying the economy.
Develop a national strategy for informal employment. Informal employment is
one of the largest categories of employment in Liberia. A comprehensive and
integrated strategy is needed to improve the earnings, productivity and working
conditions of those employed in informal activities. This would involve the
‘formalisation’ of informal employment, in the sense that strategies to support
these workers and their livelihood strategies would be developed, and, in turn,
those in informal employment would be expected to contribute to government
tax revenues at an equitable rate. Such strategies require an integrated approach
involving training, finance, technical support to enterprises, targeted public
investments, improved labour force information, and regulatory changes to
support the growth of SMEs. Coordination across various Ministries (e.g.
Commerce, Labour, Finance, Agriculture, Gender, Youth, and Planning) would
be needed to create an integrated approach to addressing informal employment.
Natural resource exports and public investment. Liberia will depend on natural
resource exports to fuel its economy for many years into the future. Many
countries that depend on natural resource exports experience a ‘resource curse’
(sometimes called the ‘Dutch disease’) with lower rates of growth, an
overvalued exchange rate that undermines competitiveness in non-resource
exports, and slower improvements in average living standards. However, not all
resource rich countries experience these problems to the same degree.33 There is
no simple relationship between natural resource exports and economic
outcomes. Policy choices matter – if Liberia makes the right policy choices, it
can turn a potential natural resource curse into a natural resource opportunity. If
the resources from commodity exports are used to fund strategic investments,
instead of simply raising consumption spending, the risk of a resource curse will
33
Humphreys, Macartan, Jeffrey D. Sachs, and Joseph Stiglitz (2007). ‘Introduction: What is
the problem with natural resource wealth?’ In M. Humphreys, J.D. Sachs, and J.E. Stiglitz, eds.
Escaping the Resource Curse, New York: Columbia University Press, pp. 1-20.
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90
be minimised.34 For example, natural resource revenues and concession
agreements can be used to supply infrastructure investments that improve
productivity and employment opportunities. A national policy for the
development of the country’s natural resources would provide a framework for
ensuring that an adequate share of the income from Liberia’s rich resource
endowments is re-invested in the domestic economy.
34
Sachs, Jeffrey D. (2007). ‘How to handle the macroeconomics of oil wealth,’ In M.
Humphreys, J.D. Sachs, and J.E. Stiglitz, eds. Escaping the Resource Curse, New York:
Columbia University Press, pp. 173-93.
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13. Concluding remarks
This rapid impact assessment of the global economic crisis in Liberia
has documented the significant negative effects that the downturn has had on
employment, the Liberian economy, and the well-being of the population.
Numbers of jobs lost do not capture the full impact: the quality of employment
has also suffered, with more people working in marginalised and precarious
activities. Conditions among informal workers and smallholders appear to have
worsened significantly – in these cases, the negative effects on employment
manifest themselves in terms of lower and more unpredictable earnings, one of
the hidden outcomes of the crisis. These changes have almost certainly resulted
in an expansion in the number of working poor, since one job often supports a
number of dependents. Therefore the crisis reinforces the cycle of long working
hours, low pay, and low productivity that helps explain the persistence of
poverty.
Perhaps the greater risk stemming from the crisis is that future jobs will
not be created because of delayed investments, unfavourable concession
negotiations, or the long-term consequences of short-term decisions made in the
context of the immediate crisis. It is crucial that the government maintains a
long term perspective with respect to its economic strategies that focuses on
future employment creation and resources for development.
At first glance, Liberia may appear to have little policy space to respond
to these challenges. However, as we have tried to underscore in this report, there
are a number of strategies which could be pursued, and these should be
considered for prioritisation within the LPRS framework. They could build on
recent initiatives and points of strength. These can be combined with longerterm policies to improve employment opportunities as the single best strategy
for reducing poverty and raising living standards. The Poverty Reduction
Strategy and the National Employment Policy provide two complementary
blueprints for moving forward. The challenge of inclusive growth and equitable
development in Liberia is very much a challenge of creating decent work for all.
It will take years to get there, but developing an appropriate employmentcentred response to the current crisis represents a concrete step towards this
ultimate goal.
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APPENDIX
Part A. List of consultations, meetings, and interviews.
Government of Liberia
Central Bank of Liberia
Forest Development Authority
Liberia Institute of Statistics and Geo-information Services
Ministry of Agriculture
Ministry of Commerce and Industry
Ministry of Finance
Ministry of Labour
Ministry of Land, Mines, and Industry
Ministry of Public Works
National Investment Commission
Employers
ADA/LAP
Chico
City Builders
Ecobank
Equatorial Biofuels
Fouta Corporation
Geo-Services, Inc
Harmony Trading
International Agricultural Consultants and Suppliers
International Aluminum
Liberian Business Association
Liberian Chamber of Commerce
Liberian Bank for Development & Investment
Liberian Electricity Company
Liberia Marketing Association
Liberia Wood Management Company
Mittal Steel
Sethi Brothers, Inc.
Workers, trade unions, and labour organisations
Arcelor Mittal Steel - former and current workers
Buchanan Renewables-current workers
Dock Workers Union of Liberia-current and former workers
Firestone Agriculture Workers Union-current and former workers
Former workers in the Timber sector
Guthrie Plantation –current workers
Liberian Agricultural Workers Union-current workers
Liberian Electricity Company-current workers
Liberian Labour Congress
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Other organisations and institutions
Embassy of the People’s Republic of China
Embassy of the United States of America
International Fund for Agricultural Development
International Monetary Fund
International Rescue Committee
Sirleaf Market Fund
Stakeholder Working Group on Tree Crops
Sustainable Tree Crop Program
United Nations Development Program
United Nations Mission in Liberia
World Bank
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Part B. Guiding interview questions for enterprises/employers.
1.
COMPANY INFORMATION
Name and title of respondant(s)
Contact information (phone, email, address)
Company name:
Location:
Main activity (sector):
For your three most important products and total sales, please indicate:
Exports to AfricaExports to the EU
Exports to the US
Current employment structure:
2.
A.
IMPACT ON GENERAL BUSINESS SITUATION
How would you rate the adverse impact of the financial crisis on the business situation
High
Moderate
No adverse impact
i.
In Your Enterprise
ii.
In the Country
iii.
In Your sector of Activity
iv.
In Your Market Overseas
(if applicable)
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Low
B.
Looking ahead at the next six months, what do you expect the business situation will be
Better
i.
In Your Enterprise
ii.
In the Country
Same
Worse
iii. In Your sector of Activity
iv. In Your Market Overseas
…… …
(if applicable)
C.
Through which channels has your company been affected by the crisis and how would
you rate them according to their severity?
Rank
Reduced access to finance from banks
Reduced access to finance from parent company
Reduced access to finance from other sources (pls. specify:
)
Reduced domestic prices
Reduced domestic demand
Reduced domestic product prices
Reduced world market demand
Reduced world market product prices
Other(pls. specify:
)
Other(pls. specify:
)
D. If you are part of an international parent company, have operations in Liberia been hit more
or less severely than overall operations? Please explain.
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3.
TRENDS IN KEY VARIABLES
A. How do you expect the following variables in your enterprise to change in the next six months
as a result of the financial crisis?
Expected
%
change
i. Volume of demand/business activity
ii. Employment
iii. Average selling price(s) of your product(s) and/or service(s)
iv. Investment
v. Expenditure on training
vi. Profit
vii. Exports (If Applicable)
B. What has been your average capacity of utilisation over the year 2008 and what you expect it
to be in 2009? (Capacity of utilisation is the actual output produced relative to the maximum
output possible using all the available factors of production. Please provide your answer as a
percentage of the maximum output possible e.g. if output is at full capacity then level of capacity
utilisation is 100%.)
Current
Level of Capacity Utilisation
4.
2009
%
%
ACTIONS TO MITIGATE THE IMPACT OF THE CRISIS
A. How many workers have you laid off so far because of the crisis? How many additional workers are you planning
to lay off currently, or if the current situation persists?
Currently planning to
lay off
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Lay off if
current
Lay off if current situation persists for another 3
situation
persists for
another year
B. What other actions have you already taken or are planning to take currently of it the current situation persists?
Already taken
i.
Adjusting hours of work (e.g. reducing overtime & no. of shifts)
ii.
Reorganising work systems and functions to improve efficiency
iii.
Redundancies/downsizing
iv.
Delaying recruitments
v.
Encouraging early retirement, voluntary/negotiated departures,
leaves without pay
vi.
Exercising non-replacement of departing staff
vii.
Postponing investment plans
viii.
Sale of assets
ix.
Outsourcing of activities
x.
Wage freeze/deferring wage increases
xi.
Wage moderation
xii. Reduction in pay packets for working lesser hours
xiii.
Consultation with workers and/or unions to renegotiate labour contracts
xiv.
Streamlining and better monitoring of expenses to cut costs
xv.
Reducing management salaries and/or bonuses
xvi.
Filling work gaps with training
xvii.
Debt restructuring
xviii. Seek financial assistance
xix. Increased marketing/promotional efforts
xx. Shut down operations in Liberia
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Currently
planned
If situation
persists 3
months
If situation
persists 1 year
C. What measures to mitigate the impact of the crisis on your economy and enterprises has the
government undertaken so far? Has your company benefited from these measures and have you
been satisfied with them?
__
D. Do you require direct assistance from your government? If yes, please indicate what sort of
assistance would enable your company to survive the current environment?
E. What interventions would assist in ameliorating the impact of the crisis on your economy?
F. What programmes should your government embark on to prepare your country for future
crisis?
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4.
GENERAL COMMENTS
Any General Comments
Thank you for participating in this Survey
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Part C. Priority themes of the workers inquiry.
For all workers discussions we need to have heading to capture relevant information such as:
Employer or former employer
Skilled –unskilled labour at site
Employment status for most (wage and salary, own account)
Age group and gender of workers (general or if statistics can be provided)
Trade union affiliation
County name
District name
Clan/township
Name of city/town/village
Whether Urban or Rural
What type of disruption has been seen in the workplace?
What impacts of the crisis have been felt: e.g. wage reductions, working hour reduction, layoffs,
doing more with less?
Does everyone know why they were released-what information provided to them?
Did you look for work during the last 30 days and what action did you take to seek work? If not,
why did you not look for work?
Will you:
Go back to home village
Migrate to city to find job
Migrate to neighbouring countries to find job
Run your own business
Acquire new skills (through training/education)
Among workers released are men or women likely to find a new job-or migrate?
Did you get any support form employer, government, community groups and family, church
groups?
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Part D. Policy suggestions and priorities identified in the interviews.
During the interviews respondents were asked to suggest recommendations on how the
government could help to stimulate employment growth. Some common themes mentioned were
to:
Reduce taxes during difficult times;
Develop initiatives to promote and support business diversification and small and
medium Liberian enterprises;
Examine the dual currency issue and initiate measures to strengthen parity; and
Improve social and physical infrastructure.
More sector specific suggestions included government intervention to mediate disputes between
workers and employers, especially concerning back pay for rubber and timber workers and
honouring terms of collective bargaining agreements. Others suggestions include:
Link laid off workers’ severance payments into alternative livelihood schemes with
micro-loan institutions.
Encourage more large investments through attractive investment incentives
The royalty, import duty and tax structure should be harmonised to create a more level
playing field.
Prioritise partially mechanised commercial lowland rice production in which Liberia has
a comparative advantage, using appropriate technology machines (e.g., power tillers and
threshers) to improve labour productivity.
Liberians should be educated learn to diversify their diet instead of depending solely on
rice through the teaching of nutrition in schools.
A stabilisation fund for rice should be established by imposing US$1 on each bag to
stabilise the price when there is upward pressure on rice prices.
Fast track the Land Commission Act to reduce land tenure barriers to local rice
production.
Create a friendly business environment with new investors and not concentrate on
immediate revenue gains but rather, longer term benefits such as sustainable
employment.
Provide leadership and a clear strategic focus to set targets in agriculture and select three
core products and focus finances, training and industry development towards meeting
targets.
Fiscal reforms including better management of public finances, systems & controls plus
tax policy.
Prioritise government budget spending in L$ rather than US$ to reduce pressure on the
L$.
The Central Bank should stimulate certain types of activity through monetary policy.
Bank financing of local and global value chains and commercial farming of short-cycle
food crops (e.g., rice and cassava) are key to improving their fortunes.
The Investment Incentive Code should be reviewed and made more business friendly to
attract investments in agriculture, real estate, hotels, energy and cement.
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There is need for transparent equivalent of the US Small Business Administration to
build the capacity of Liberian businesses and economically empower them to more
successfully manage their affairs in the formal economy.
More micro-finance access is needed to reduce vulnerability of marketers by increasing
their inventory and trading capital.
Reduce corruption and improve the justice system.
Promote alternative sources of energy production, which is necessary for job creation.
Another suggestion made was to develop a concrete plan for economic empowerment which
would in turn result in the promotion of sustainable enterprises and employment. This program
has been proposed and should be considered as a means to addressing local economic
development. It could be a useful program to improve the Liberian economy and stimulate
employment growth through a transparent governance structure. The key components of the
program are outlined below.
ECONOMIC EMPOWERMENT PROGRAM
OBJECTIVES:
To improve agricultural productivity, purchasing power & food security;
To promote light industry via SME growth to stimulate jobs, incomes and skill levels thru
value-added processing; and
To reduce vulnerability of households through support for well structured micro-finance
activities.
GOVERNANCE/PROGRAM MANAGEMENT
7-member Board selected out of Commerce Ministry, ILO, AfDB, LBA, USAID, Oxfam
GB, Soros Foundation, USADF, IFC, LEDFC, mining and rubber companies
Board Project Selection sub-committee for transparency. Profitability criteria
Selection of private sector Implementing Partner through open tender process
Quarterly project selection and M&E reporting
Annual audit by independent audit firm
ELIGIBILITY
Registered producer groups, FBOs, coops, micro-loan and savings groups (for petty
business lending), SMEs, marketing associations, CBOs, women and youth groups
Grants and/or interest-free loans ranging from US$ 25-100k
Applicants to demonstrate long term project sustainability
Maximum capacity building and business development period of 12-18 months
Must fit within agribusiness, light industry and micro-finance sectors
Co-financing allowed , provided no double funding of identified needs
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